c:^7^-u^  <f-  'i-t^^ 


;^^^o 


THE  FUNDAMENTAL  PROBLEM 

IN 

MONETARY  SCIENCE 


BY 

CORREA    MOYLAN    WALSH 

Author   of    The    Measurement   of   General   Exchange- Value 


Npfa  fnrlt 
THE     MACMILLAN     COMPANY 

LONDON:    MACMILLAN  &  CO.,  Ltd. 

1903 


Copyright,  1903, 
By   THE   MACMILLAN    COMPANY 


80ount    ©Icasant  CDrces 

J.  Horace  McFauland  Company 
Hahkisburo   •  Pennsylvania 


CONTENTS 


>•  FART  I.     INTRODUCTION 

az 

-c 
or 

2?  CHAPTER  I 

NATURE  OF  THE   PROBLEM 

?•■  PAGB 

~     §1.  The  requirement  of  stability  in  value      .         .         .         .  1 

g     §2.  Several  meanings  of  the  term  "value"    ....  2 

^     2  3.  Four  kinds  of  economic  values         .....  6 

§4.  History  of  the  classification  of  value        ....  8 

§5.  The  problem  narrowed  to  two  principal  kinds  of  value  11 

V 

r'  CHAPTER   II 

^  HISTORY  OF  THE   PROBLEM 

?  1.    Early  history 13 

^  2.  The  British  Gold  and  Silver  Commission         ...  13 

§3.  The  American  Academy  of  Political  and  Social  Science  16 

§4.  A  middle  position      ........  20 

§5.  Some  recent  opinions        .......  22 

CHAPTER    III 

IMPORTANCE  OF  THE   PROBLEM 

§1.    A  few  examples         ........       26 

?2.    Plan  of  the  work 29 

(V) 


389175 


VI 


CONTENTS 


PART  II.     HISTORICAL  SURVEY 

CHAPTER   I 
EARLY   ECONOMISTS 

§  1 .    First  views  about  the  commodity  standard 

^2.    The  corn  standard     ........ 

^  3.    The  land  standard    ........ 

^  4.    The  commodity  standard  iu  the  eighteenth  century,  and 
the  subject  of  contracts  ...... 

?  5.    The  labor  standard  ........ 


PAGB 
31 

33 

38 

40 
45 


§  6.    Summary  ..........       46 


CHAPTER   II 

ADAM  SMITH  AND  RICARDO 

?  1 .    Adam  Smith 

§  2.    Ricardo      ....... 

^  3.   Comparison        ...... 

§  4.    Their  followers  ..... 


46 
53 
59 
62 


CHAPTER   III 


FOLLOWERS 

1 .  In  France  and  Germany 

2.  Malthus      . 

3.  Senior 

4.  Decline  of  this  school 

5.  Revival 

C.  The  Austrian  school 


OP  ADAM  SMITH 


64 

r\ 

78 
79 
86 


CHAPTER   IV 

FOLLOWERS   OF   RICARDO 
§  1.    James  Mill         ....... 

§2.    McCulloch 

^3.    Later  followers  ...... 

§4.    Present  use  of  his  doctrine      .         .         .         . 

^5.    Mixture  of  the  two  labor  standards  —  Bastiat 


87 

88 

95 

101 

103 


CONTENTS  Vll 

CHAPTER    V 

ECONOMISTS  CONFUSED  BETWEEN  A   LABOR -VALUE   AND 

EXCHANGE  ■  VALUE  p^CB 

§1.    J.  B.  Say;  Estrada 105 

§  2.    On  requiring  in  the  standard  both  constancy  of  cost  of 
production  and  equableness   between  supply  and    de- 
mand       ..........     110 

113 
120 
129 
133 
146 


2  3.  Some  German,  French,  and  Spanish  economists 

§  4.  J.  S.  Mill  and  his  school  .... 

§5.  Two  contemporary  economists 

§  6.  Confused  monometallists  .... 

§  7.  Confused  bimetallists 

CHAPTER   VI 


ECONOMISTS   WHO   HAVE   PASSED   FROM  THE   ONE  TO  THE 
OTHER  STANDARD 

§  1.    G.  Gamier ,         .  149 

§2.    Bailey 150 

2  3.    Jevons .  154 

2  4.  Three  contemporary  economists        .....  160 

CHAPTER   VII 
CONTINUATORS  OF    THE   EARLY   DOCTRINE   OF    EXCHANGE   VALUE 


1.  English  writers  of  the  Bank  Restriction  period 

2.  Lowe  and  Scrope 


166 
171 

3.    Other  writers  during  the  period  of  contraction,  1820-50     174 

178 
182 
189 
191 
196 
201 


§4.  Writers  at  the  time  of  the  gold  inundation,  IB-iO  70 

?  5.  Economists  defectively  stating  their  position 

^6.  In  the  period  since  1873  —  the  bimetallists 

§7.  Economists  who  favor  bimetallism  . 

2  8.  Economists  opposed  to  bimetallism 

§  9.  Even  some  militant  monometallists 

CHAPTER   VIII 

MEDIATORS   BETWEEN  THE  TWO   STANDARDS 

§1.    Partial  mediators 205 

§  2.    Impartial  mediators •     208 

2  3.    On  the  measurement  of  the  mediate  position.         .         .     214 


viii  CONTENTS 

PART  III.     SYSTEMATIC  REVIEW 

CHAPTER   I 

NEED  OF  CARE  IN  INTERPRETING  THE  STATEMENTS  OF 
ECONOMISTS 

PAGE 

21-    Inconsistent  use  of  terms 215 

§  2.    Non-observance  even  of  a  definition        ....     218 

CHAPTER   II 
CLASSIFICATION  OF    THE   STANDARDS 

§1.  The  classification 221 

§  2.  Supporters  of  the  commodity  standard    ....  223 

§3.  Transition  through  the  prices-and-wages  standard  .  226 

§4.  Supporters  of  the  wages  standard 228 

§5.  Supporters  of  the  cost  standard 232 

CHAPTER  III 
COMPARISON  OF  THE  PRINCIPAL  STANDARDS 

2  1.    Attitude  toward  improvements 235 

?2.  Attitude  toward  abundance       ......  246 

I'd.    Attitude  toward  contracts 256 

§4.  Attitude  toward  wages  or  incomes           ....  267 


PART  IV.     TOWARD  A  SOLUTION 

CHAPTER    I 
NATURE  OF  THE   STANDARDS 

§1.    The  commodity  standard 276 

§  2,   The  intermediate  standard 277 

§  3.    The  wages  standard 279 

§4'   The  cost  standard 280 


CONTENTS  IX 

PAGE 

§5.    Comparison  of  the  cost  standard  and  the  wa^es  stand- 
ard    281 

§  6.    The  divergence  of  the  standards      .....  283 

i  7,    Parallel  presentment  of  the  standards    ....  286 

CHAPTER   II 
NATURE  OF  THE  ARGUMENTS  FOR  THE  STANDARDS 

§  1.  Against  arguing  for  esteem  value  as  "value"  proper     .  288 

§2.  Against  arguing  for  a  labor-value  as  "real-value"         .  291 

§  3.  Against  arguing  from  a  theory  of  value  .         .         .  295 

§  4.  Against  arguing  from  causes  ......  297 

§  5.  Against  arguing  from  falling  costs  to  falling  prices       .  299 
§  6.  Against  choosing  the  supposedly  most  convenient  stand- 
ard    300 

§  7.  Against  appealing  to  authority         .....  301 

§  8.  Division  of  the  arguments 302 

CHAPTER  III 

ARGUMENT  FROM  THE  FUNCTIONS  OF  MONEY 

?1.    The  argument  from  money  being  the  measure  of  value     303 

308 
311 
31G 


:  2.  The   argument  from  money  being  a  store  of  value 

:3.  The  nature  of  storing  not  altered  by  progress 

:  4.  Minor  arguments  refuted  ..... 

'  5.  The  labor  standard  itself  to  be  measured  by  the  com 

modity  standard 

:  6.  Arguments  for  the  intermediate  standard  rejected 

7.  Another  conception  of  esteem-value 


321 
327 
332 


i  8.    A  general  argument  against  stability   in   esteem-value     334 

CHAPTER    IV 

ARGUMENT  FROM  THE  RESULTS  OF  MONEY  BEING  STABLE  IN 
THE  DIFFERENT  KINDS  OF  VALUE 

:  1.    Contending   positions  with   regard  to   the  payment   of 

loans  and  of  wages  .......     337 

i  2.    Another  position,  leading  to  indifference         .         .         .     342 


X  CONTENTS 

PAGE 

2  3.    The  argument    from  distribution  between  debtors  and 

creditors           .........  344 

§4.    The  argument  from  distribution  between  employers  and 

employees        .........  351 

^5.    A  neglected  element  in  the  latter  argument  .         .         .  359 

§  6.    Money  not  properly  a  distributor  of  wealth    .         .         .  3G2 

§  7.    On  the  empirical  argument      ......  365 

§  8.    A  presumptive  argument,  in  its  place      ....  366 


CHAPTER    V 
CONCLUDING  REMARKS 

§  1.    Need  of  clear  ideas  in  science        .....  369 

§  2.    Meaning  of  settling  a  question  in  science        .         .         .  370 

?  3.    Present  need  of  settling  our  problem      ....  371 

2  4.    Need  of  specialization  in  economics        ....  372 


THE  FUNDAMENTAL  PROBLEM   IN 
MONETARY    SCIENCE 


PART  I.    INTRODUCTION 


CHAPTER   I 

NATURE    OF    THE    PROBLEM 

§1.  In  monetary  science,  at  the  present  stage  of  its 
development,  the  fundamental  problem  is  to  determine 
what  is  in  good  money  the  quality  that  constitutes  its 
goodness.  Monetary  problems  do  not  stop  at  the 
physical  qualities  of  the  material  of  which  money  is 
made:  as  whether  it  should  be  light  or  heavy,  yellow, 
white,  or  red,  or  whether  it  should  be  divisible,  cogni- 
zable, and  generally  acceptable.  These  are  questions 
which  belong  rather  to  the  more  elementary  considera- 
tion of  convenient  and  sound  currency.  Good  money 
has  its  foundation  laid  much  deeper,  and  the  determi- 
nation of  its  nature  has  the  most  wide -reaching  in- 
fluence. Money  is  used  as  a  measure  of  value  not  only 
at  the  same  time  and  place,  but  continuously  through 
the  course  of  time.  It  is  also  a  store  of  value  over 
short  or  long  periods,  being  so  used  not  only  by  those 
who  keep  or  hoard  it,  but  by  those  who  part  with  it 
v^>,  on  terms  of  future  restitution.  The  primary  quality 
'O^  in  good  money  has  therefore  been  almost  universally 
;^"  recognized  to  be  stability  of  value.     That  is  the  best 


money  which   approaches   nearest   to    being    stable   in 


^ 


(1) 


2  INTRODUCTION 

value.  So  much  a  commonplace  is  this  in  writings  on 
tlie  subject  that  it  would  be  idle  to  cite  authorities. 
With  the  fewest  exceptions,  economists  have  affirmed 
that  what  is  primarily  desired  in  a  monetary  system  is 
that  the  money  should  be  as  stable  in  value  as  possible. 
Some  even  have  gone  so  far  as  to  say  that  it  is  the 
duty  of  government  to  provide  such  money,  if  it  cannot 
be  obtained  naturally.  The  majority  content  them- 
selves with  saying  that  selection  should  be  made  of  the 
material  which  of  itself  is  the  least  variable  in  value, 
or  are  satisfied  that  this  has  already  been  done.  The 
fundamental  attribute  of  good  money  seems,  then,  to  be 
unanimously  decided  upon.  Unfortunateh'  the  little 
word  "value"  is  ambiguous.  And  so  it  has  happened 
that  the  writers  who  agree  in  the  words  they  use  have 
had  very  different  meanings,  and  the  unanimity  in 
regard  to  the  prime  quality  in  good  money  is  only 
apparent.  We  are  obljg^ed,  therefore,  to  seek  further 
below  the  surface,  and  to  inquire  :  What  Jdnd  of  value 
is  it  that  money  measures  and  stores  and  should  possess 
in  a  stable  manner?  This  is  the  fundamental  problem 
in  monetary  science.  It  is  a  problem  in  consequence  of 
the  differences  of  meaning  which  people  have  attached 
to  the  word  "value."  It  has  become  a  problem  only 
since  a  beginning  has  been  made  in  the  recognition  of 
these  differences.  It  remains  to  this  day  a  problem 
because  as  yet  but  few  persons  have  consciously  distin- 
guished these  differences  and  still  fewer  have  even 
casually  entertained  any  question  concerning  them. 

§2.  There  are  many  meanings  of  the  term  "value." 
The  monetary  writers  of  several  centuries  back  dis- 
tinguished in  money  — and  only  in  money -^between 
extriosic   and   intrinsic   value.     By  "e^tric^sic  value" 


NATURE  OF  THE   PROBLEM  3 

they  meant  the  denomination  in  mone}'  of  account  offi- 
cially set  upon  the  coins.  Some  writers  have  been 
satisfied  if  the  same  denominations  be  always  kept, 
monej'  then  being  stable  in  this  kind  of  value.  To  ^ 
them  a  dollar  always  is  a  dollar,  no  matter  how  its  other 
kinds  of  value  maj'^  be  altered  or  fluctuate.  Persons 
who  hold  such  a  view  occupy  the" lowest  plane  among 
those  who  pretend  to  hold  any  views  on  monetary  mat-  :^ 
ters,  and  they  have  rarely,  if  ever,  been  influential. 
Not  so  the  persons  who  have  been  impressed  by  the 
other  of  the  two  primitive  kinds  of  value.  The  metallic 
content  of  coius  was  called  their  "intrinsic  value."  Such 
intrinsic  value  has  by  many  writers  on  the  subject,  from 
_JDopernicus  down,  been  taken  to  be  the  kind  of  value 
which  ought  to  be  kept  stable,  This_ merely  means  that 
the  metallic  weight  and  fineness  of  money  is  the  invari- 
able quality  desired.  If  this  be  the  true  doctrine  of 
money,  it  should  be  held  through  thick  and  thin  to  mean 
that  when  a  metallic  system  of  money  has  once  been 
established  it  should  be  maintained  unchanged  forever, 
no  matter  how  much  any  other  of  the  kinds  of  value  of 
the  metaj  or  metals  might  vary.  Itjs  hardly  necessary 
to  state  that  this  doctrine  has  never  yet  for  long  been 
acted  upon,  and  few  of  its  supporters  have  really  desired 
that  it  should  be  acted  upon  in  all  possible  cases.  If 
some  enormous  deposits  of  gold  and  silver  should  be 
discovered,  orjf  the  dreams  of  the  alchemists  were  to 
be  realized,  and  these  metals  should  begin  to  fall  in 
value,  and  give  prospect  of  falling  to  the  level  of  copper 
or  tin,  weshould  soon  see  the  advocates  of  permanent 
intrinsic  value  clamoring  for  alteration.  TJi^eoretically, 
therefore,  the  doctrine  is  not  tenable.  It  can  be  main- 
tained only  as  practically  desirable  iu  the  ordinary  run 


4  INTRODUCTION 

of  events,  because  of  the  greater  evils  that  may  ensue 
upon  departing  from  it.  And  although  some  economists 
talk  in  an  extravagant  way  about  its  being  the  ne  plus 
ultriLot  monetary  science,  the  majority  of  the  most  in- 
fluential ones  are  more  cautious  and  admit  its  theoretical 
shortcomings,  and  are  grieved  because  money  constant 
in  this  kind  of  value  does  not  remain  constant  in 
value  proper. 

This  doctrine  of  constant  intrinsic  value  has  been 
reached  also  through  another  equivocal  use  of  words. 
Money  being  regarded  as  a  measure,  it  has  been  said 
that,  like  other  measures,  it  should  be  fixed  and 
invariable  —  without  defining  in  what  respect  it  should 
be  fixed  and  invariable.  Then,  a  coinage  system  being 
once  established,  the  inference  was  immediately  drawn 
that  the  coins  already  existing  and  their  denominations 
should  be  kept  unaltered — in  other  words,  that  the 
monetary  unit  should  always  be  the  same  weight  of  the 
^arae  metal.*  Really  this  is  like  saying  that  the  unit 
of_length  should  always  be  the  same  weight  of  the 
same  material,  or  that  the  unit  of  weight  should  always 
be  the  same  volume  of  the  same  material. t  From  the 
same  source  has   arisen   another  mistake.      The  whole 


*  E.  g.  "The  size  [of  the  coin]  having  been  once  fixed  upon,  it 
should  remain  invariable,"  F.  Wayland,  TJie  elements  of  political 
economy,  New  York,  1837,  p.  243.  Cf.  also,  "The  foundation  of  the 
science  of  money  must  bo  laid  with  the  concrete  of  the  '  logic  of  the 
unit  of  weight  system,'"  J.  11.  Norman,  Silver  and  gold  coinage  of 
England  since  the  Conquest  to  the  present  time.  Journal  of  the  Royal 
Statistical  Society,  London,  December  1890,  p.  C8G.  (The  sub-quotation 
in  referred  to  Leroy-Beaulieu,  1889.) 

tTliis  position  was  also  reached  from  the  view  that  the  subject  of 
contracts  is  a  specific  quantity  (by  weight  or  bulk)  of  a  specific  sub- 
stance, so  that  in  the  capacity  of  money  as  "a  subject  of  contracts  for 
future  payment,"  "tlie  fixity  of  a  standard  is  most  essential."  So  Tooke, 
History  of  prices.  Vol.  IV.,  1848,  pp.  145-0.-         •  .  


NATURE   OF  THE   PROBLEM  5 

currency  of  a  country  has  been  taken  to  be  its  measure 
of  value.  Ami  as  the  measure  of  value  ought  to  be 
kept  fixed,  it  has  been  concluded  that  the  total  quantity 
of  money  in  a  country  should  be  maintained  at  a  fixed 
figiire.*  It  is  hardly  necessary  to  state  that  such  a 
monetary  system  would  not  remain  constant  in  any 
sense  of  the  word  "value." 

A  wholly  illegitimate  sense,  though  one  frequently 
used,  catachrestically,  for  the  hire  of  capital,  has  been 
put  upon  the  word  "value,"  in  connection  with  money, 
in  identifying  it  with  the  rate  of  interest  or  discount. 
In  consequence  of  this,  some  persons  have  thought  it  of 
the  greatest  importance  that  money  should  be  kept 
stable  in  this  kind  of  "value,"  that  is,  that  monetary 
and  currency  regulations  should  be  so  framed  as  to  keep 
constant  the  rate  of  discount. t  But  few  have  been 
misled  by  this  absii.rd  delusion.     However  desirable  it 

*Even  Locke  bordered  upon  tliis  error,  in  his  Cousideradons  of  the 
lowering  of  iuteresf,  Vol.  V.  of  the  1823  edition  of  his  Works,  p.  48,  cf. 
pp.  41-5.  (Elsewhere,  of  course,  he  heUl  the  fixed  intrinsic  value 
doctrine,  as  when  he  says  tliat  creditors  should  receive  back  "the  same 
value,  i.  e.  the  same  quantity  of  silver,"  ib.  p.  87.)  An  otherwise 
almost  perfect  little  treatise,  An  essay  on  money,  London,  1818,  by 
Ch.  R.  Prinsep,  is  spoiled  by  recommending  fixation,  instead  of  adapta- 
tion, of  the  quantity  of  inconvertible  paper  money,  pp.  137-143. 
Recently  in  The  silver  question  settled,  New  York,  1C93,  R.  H.  Smith 
says  :  "An  ideal  standard  of  value  requires  that  the  metal  which  is 
proposed  to  be  useil  as  such  standard  should  increase  up  to  a  certain 
limit,  and  after  that  remain  at  a  certain  fixed  amount,"  p.  45. 

tThe  arch-priest  of  this  dogma  is  E<lward  Kellogg,  who  bit  upon 
what  has  since  been  called  the  "interconvertible  bond"  scheme,  in  1843. 
In  his  JYeiv  monetary  system,  1801,  he  says:  "Anything  that  exists  in  per- 
petuity, is  valuable  in  exact  proportion  to  the  income  it  will  yearly  bring 
to  its  owner.  .  .  .  Therefore,  to  keep  its  value  [of  money]  uniform, 
the  rate  of  interest  must  be  kept  uniform;  "  and  again:  "  The  measure 
of  value  is  instituted  and  made  by  law  ;  and,  consequently,  it  is  fraud- 
ulently used  when  the  rate  of  interest  upon  it,  which  determines  its 
value,  is  altered  by  individuals,"  5th  ed.,  Philadelphia,  i875,  pp.  64,  65. 


6  INTRODUCTION 

may  be,  for  business  purposes,  that  the  rate  of  discount 
be  constant,  this  is  generally  recognized  to  be  a  financial 
end,  which  perhaps  may  follow  upon  a  monetary  system 
that  is  stable  in  some  true  kind  of  value,  but  which 
must  not  be  sought  at  the  expense  of  stability  in  any 
true  kind  of  value. 

§3.  True  economic  value  is,  then,  the  value  the 
stability  of  which  is  the  quality  primarily  desired  in 
money.  BiU  economic  value  itself  is  a  value  with  sev- 
eral varieties  or  species.  At  all  events,  by  "value" 
economists  have  meant  several  distinct  attributes  or 
qualities  in  things.  They  have  meant,  sometimes,  using 
the  word  in  a  popular  sense,  little  more  than  what  is 
signified  by  the  word  utility:  and  this  may  be  distin- 
guished as  use-value.  They  have  meant  also  the  cor- 
relative in  things  of  the  esteem  in  which  we  hold  things 
—  of  the  affection  and  attachment  we  have  for  things, 
the  energy  with  which  we  cling  to  what  we  possess,  and 
the  effort  we  are  willing  to  put  forth  to  acquire  things: 
which  may  be  called  their  esteem -value.  They  have, 
fij  again,  meant  the  correlative  of  the  effort  or  labor  which 
}  things  cost  their  producers:   which  may  be  called  their 

cost-value.  They  have  meant,  finally,  the  purchasing 
power  of  one  thing  over  another  thing  or  over  things  in 
general:  which  is  properly  to  be  called  its  exchange - 
value  ^ 

~  These  kinds  of  value,  differently  variable  in  amount 
in  the  same  thing,  are  distinguishable  also  by  the 
methods  by  which,  roughly  or  accurately,  we  measure 
their  amounts.  Use-value  is  a  purely  physical  attribute 
in  things  in  relation  to  physical  and  moral  qualities  in 
our  bodies  and  minds.  It  consists  wholly  in  what  a 
thing  can  do  for  us,  on  the  general  supposition  that  we 


NATURE    OF   THE   PROBLEM  7 

want  something  to  be  done  which  it  can  do.  It  is  the 
same  in  a  given  thing  no  matter  how  large  or  small  be 
the  species  to  which  it  belongs,  that  is,  no  matter  how 
many  or  how  few  be  the  other  things  like  it  in  onr 
possession  or  within  our  reach.  On  the  contrary,  the 
esteem -value  of  a  thing  is  dependent  upon  the  number 
of  other  things  like  it  which  we  possess  or  may  possess, 
having,  in  a  general  way,  an  inverse  relationship  to  that 
number.  It  is  greater  or  smaller  according  to  the  desire 
awakened  in  us  by  the  utility  of  the  thing  in  the  par- 
ticular circumstances  in  which  we  find  ourselves.  A 
class  of  things  may  be  very  useful  to  us,  but  if  we 
already  possess  much  of  it,  we  may  be  satisfied  and 
want  no  more  of  it,  or  may  even  be  willing  to  throw 
away  some  of  it  as  superfluous.  The  want  we  feel  of 
possessing  a  thing  is  not  proportionate  to  its  utility 
alone,  but  to  its  utility  and  rarity;  and  the  esteem  in 
which  people  hold  a  class  of  things,  or  the  esteem -value 
which  they  put  into  it,  is  a  general  level  of  the  wants 
they  feel  for  it.  Cost-value  is  proportionate,  not  to  the 
amount  of  labor  we  should  have  to  expend  to  produce  a 
thing  if  we  produced  it  for  ourselves,  and  especially  not 
to  the  amount  of  labor  Ave  should  be  willing  to  expend 
to  produce  it  were  we  compelled  to  rely  on  our  own 
efforts,  but  to  the  amount  of  labor  actually  expended 
upon  its  production  b}'  those  who  actually  do  produce 
it^ — by  "producing"  meaning  every  act  up  to  the  hand- 
ing over  of  the  article  to  its  consumer  (or,  for  practi- 
cal purposes,  to  the  retail  dealer) .  In  the  long  run 
cost-value  cannot  be  above  esteem-value,  because  in 
that  ease  people  would  cease  to  produce  it;  but  it  can 
remain  indefinitely  below  esteem -value,  the  difference 
accruing  to  those  who  own  ttie  limited  means  of  pro- 


8  INTRODUCTION 

duction.  Thus  a  tLiug  already  produced  maj'-  command 
more  labor  than  it  cost.  And  if  the  cost- value  of  a 
thing  be  measurable,  in  some  way,  by  an  average  of  the 
amounts,  or  by  the  greatest  amount,  of  labor  required 
to  produce  it,  its  esteem -value  would  seem  to  be  meas- 
urable, in  some  way,  by  an  average  of  the  amounts  of 
labor  the  thing  will  command.  A  thing  will  command 
less  labor,  for  instance,  if  it  is  produced  with  less  labor, 
provided  it  fall  in  esteem -value,  which  it  will  do  if  in 
consequence  of  its  more  easy  production,  circumstances 
permitting,  the  quantity  supplied  is  greater  than  for- 
merly iu  comparison  with  the  demand  for  it.  Thus  there 
is  a  connection  between  esteem -value  as  well  as  cost- 
value  and  the  productiveness  of  labor;  but  while  cost- 
value  depends  solely  upon  the  productiveness  of  labor, 
or  upon  the  fertility  of  the  sources  from  which  it  is 
supplied,  esteem -value  depends  also  upon  the  prolific- 
ness  of  the  sources  to  which  labor  may  be,  and  is, 
applied.  Some  caution  and  reserve  of  language  is 
necessary  here,  because  the  ideas  of  cost -value  and 
esteem -value  have  not  j'et  been  full}'  expounded.  In 
regard  to  exchange-value  there  is  no  such  uncertaintj'. 
We  are  certain  that  the  exchange -value  of  a  thing  is  to 
e  measured  somehow  by  an  average  of  its  purchasing 
powers  over  other  classes  of  things,  which  powers  are 
themselves  measured  by  the  quantities  of  the  things 
for  which  it  will  exchange. 

§4.  That  value  is  not  a  simple  concept  has  long  been 
recognized.  Following  in  the  footsteps  of  Turgot,  who 
had  himself  been  preceded  by  Locke,  Adam  Smith,  as  is 
well  known,  divided  value  into  two  kinds,  which  he 
called  "value  in  use"  and  "value  in  exchange"  or  "ex- 
changeable value,"  which  he  also  spoke  of  as  "relative 


NATURE    OF  THE   PROBLEM  9 

value;"  and  he  has  been  followed  by  almost  all  econo- 
mists. In  this  division  of  value  are  left  out  of  account 
those  kinds  which  have  above  been  first  noticed  as  tech- 
nical uses  of  the  term  in  the  old  monetary  science  and 
in  the  jargon  of  the  "street."  Because  these  two  kinds 
of  value  have  been  recognized  by  most  economists,  they 
are  here  called  kinds  of  "economic  value."  Yet  most 
economists,  beginning  with  Adam  Smith  himself,  have 
noticed  use-value  as  a  kind  of  value  only  to  be  men- 
tioned and  to  be  set  aside.  In  doing  so  they  have  done 
well,  because  such  value  is  little  else  than  a  popular 
identification  of  value  with  utility,  and  there  is  no  need 
in  science  for  two  terms  expressing  the  same  idea. 
Adam  Smith  and  his  followers  are  then  left  with  only 
one  economic  value,  or  rather  with  only  one  term  for  the 
three  remaining  economic  values.  They  have,  in  fact, 
jumbled  the  three  kinds  of  economic  value  under  the 
one  term  "exchange- value,"  proper  onl}'  to  one  of  them. 
Adam  Smith  did  so  originally,  for  the  case  of  esteem - 
value,  because  of  a  mistaken  notion  that  labor  is  a  com- 
modity interchangeable  with  material  commodities.  It 
is  supposed  that  people  exchange  labor  for  goods,  and 
goods  for  labor.  Hence  it  is  conceived  that  goods  have 
a  purchasing  power  over  labor  as  well  as  over  other 
goods,  and  that  labor  has  a  purchasing  power  over 
goods.  TNow,  the  exchange-value,  so  conceived,  of  goods  p. 
in  labor  is  really  the  esteem -value  of  the  goods;  and 
the  exchange-value  of  labor  in  goods  is  the  cost-value, 
not  of  labor,  but  of  the  goods  themselves.^  But^,  in 
truth,  neither  the  esteem- value  nor  the  cost- value  of 
goods  is  exchange-value;  for  goods  are  not  exchanged 
for  labor,  nor  labor  for  goods.  An  exchange  is  an  in- 
terchange between  two  parties  of  two  objects  that  can 


10  INTRODUCTION 

be  transferred  from  the  one  to  the  other,  or  which  can 
be  produced  by  the  one  for  the  other,  such  as  a  service. 
In  every  exchange,  on  each  side,  there  must  be  a  receiv- 
ing as  well  as  a  giving  or  a  producing.  Labor  can  only 
by  a  stretch  of  metaphor  be  said  to  be  given  or  to  be 
produced;  certainly  it  cannot  be  said  to  be  received. 
Only  the  product  of  labor  can  be  received,  whether  it  be 
something  material  or  immaterial.  Nor  is  labor  ever 
purchased,  but  only  the  product  of  labor — except  that 
where  slavery  exists  the  performer  of  labor,  the  man 
himself,  may  be  purchased,  for  the  sake  of  the  material 
or  immaterial  products  of  his  labor,  but  not  for  the  sake 
of  his  labor  itself.  Labor,  in  short,  is  not  an  exchange- 
able object,  and  cannot  have  exchange-value.  When  a 
free  laborer  works  for  money,  there  is  some  proportion 
between  his  labor,  measured  by  intensity  aud  by  time, 
and  the  amount  of  money  he  gets,  which  proportion  is  a 
different  thing  from  the  proportion  between  the  product 
received  by  the  employer  and  the  money  he 'pays.  The 
exchange -value  of  the  money  is  properlj^  measured  by 
Uhis  latter  proportion,  averaged  upon  all  products,  not 
'by  the  former.  When  the  former  proportion,  averaged 
upon  all  wages  (or  earnings),  is  employed  to  measure 
the  value  of  money,  it  is  another  kind  of  value  of 
money  that  is  being  measured.  This  is  properly  the 
esteem -value  of  money,  for  which  the  idea  of  cost -value 
was  substituted  by  Ricardo,  without  noticing  that  in 
cost- value  there  is  not  even  the  possibility  of  bringing 
in  the  idea  of  exchange -value.  Exchange -value  is  thus 
obviously  distinct  from  both  esteem -value  and  cost- 
value.  And  to  put  these  two  ideas,  or  either  of  them, 
under  the  term  properly  designating  exchange -value 
alone,  is  an  error  and  a  confusion  of  thought  generative 


NATURE   OF   THE    PROBLEM  11 

of  other  confusion  and  of  other  error.  Because  of  it 
our  problem  exists  to-day.  For  because  of  it  econo- 
mists have  not  been  in  a  position  easily  to  distinguish 
what  they  meant  when  they  said  that  money  ought  to  be 
stable  in  "value,"  even  though  they  added,  with  appear- 
ance of  more  defiuiteness,  that  it  ought  to  be  stable  in 
"exchange-value,"  since  by  this  term  they  might  mean 
either  exchange -value  proper  or  esteem -value  or  cost- 
value.  And  this  is  almost  equally  true  at  the  present 
day,  notwithstanding  that  some  fifty  years  ago,  in  Ger- 
many, Roscher  divided  value  into  use-value,  exchange- 
value,  and  cost-value,  and  some  twenty-five  j-ears  ago, 
in  England,  Jevous  divided  value  into  use -value,  ex- 
change-value, and  esteem -value,  thus  together  giving 
us  the  four  kinds  of  value;  for  such  co-ordination  of 
cost- value  and  of  esteem -value  alongside  of  exchange- 
value  has  not  yet  come  into  general  recognition. 

§5.  The  idea  of  use- value  is,  of  course,  to  be  left  out 
of  consideration.  We  are  not  concerned  Avhether  money 
remains  constant  or  not  in  use -value.  In  fact,  money 
has  use-value  only  in  consequence  of  having  exchange- 
value,  since  the  only  use  we  make  of  money  as  money 
is  to  exchange  it  for  the  things  we  really  want.  Or 
perhaps  even  it  may  be  right  to  assert,  with  Ran,*  that 
money  has  not  use -value  at  all,  since  it  is  never 
consumed.  The  question,  then,  narrows  itself  to  the 
three  positions,  whether  money  should  be  stable  in 
exchange- value,  or  in  cost- value,  or  in  esteem -value. 
Furthermore,  we  have  seen  both  cost -value  and  esteem- 
value  to  be  connected  with  labor.  On  this  account 
these  two  concepts  have  been  little  distinguished  from 
each  other.     Together  they  have  often  been  treatedas 

•  Volkswirthschaftslehre,  §§64,  265. 


12  INTRODUCTION 

a  sort  of  value  that  is  measured  somehow  by  what  has 
beeu  called  the  labor  standard,  over  agaiust  a  kiud  of 
value  that  is  measured  by  what  has  beeu  called  the 
commoditij  standard.  The  former  has  been,  iu  a  vague 
sort  of  way,  called  labor-value,  aud  over  agaiust  this 
the  latter,  which  is  exchange -value  proper,  has  been 
called  commodity -value,  especially  wheu  the  values  of 
money  have  been  dealt  with,  money  being  contrasted 
either  with  labor  or  with  commodities.  The  question  is 
thus  still  further  narrowed  iu  appearance,  though  not 
at  bottom.  And  in  this  way  of  vaguely  contrasting 
only  two  kinds  of  value  we  also  may  be  permitted  at 
times  to  treat  our  subject.  I£  any  one  decides  that 
money  ought  to  be  stable  in  exchange-value,  by  means 
of  the  commodity  standard,  he  has  little  need,  for  the 
purpose  before  us,  to  distinguish  further  between  the 
two  kinds  of  labor-value.  But  if  any  one  decides  that 
stability  of  the  value  of  mone3'  is  to  be  judged  by  the 
labor  standard,  he  should  feel  it  incumbent  upon  him 
to  elaborate  this  standard  by  distinguishing  between 
the  ways  it  is  to  be  applied,  and  to  decide  further 
between  stability  in  cost- value  and  stability  in  esteem- 
value.  At  the  beginning,  therefore,  the  problem  may 
be  regarded  as  principally  a  two-faced  one :  Ought 
money  to  be  stable  in  commoditij -value,  or  exchange- 
value,  or  ought  it  to  be  stable  in  labor-value, 
whether  this  be  cost-value  or  esteem-value?  It  is 
only  in  this  double  aspect  that  the  question  has  as  j-et 
been  treated,  although  by  some  persons  it  is  cost-value, 
and  by  others  it  is  esteem -value,  that  has  been  con- 
trasted with  exchange-value.  Stability  in  exchange- 
value  is  always  one  side  of  the  question;  and  yet  even 
the  idea  of   exchange -value  itself   has  not  often  been 


HISTORY   OF   TEE  PROBLEM  13 

strictly  conceived.  Thus  there  is  confusion  on  both 
sides  of  the  question,  and  on  both  sides  there  is  need  of 
clarification.  But  for  the  present  we  may  content  our- 
selves with  clearly  understanding  that  the  question  is 
at  least  two-sided. 


CHAPTER   II 

HISTORY    OF    THE     PROBLEM 

§1,  In  the  first  half  of  the  nineteenth  century,  and 
especially  in  the  second  quarter,  when  prices  were  fall- 
ing because  of  greater  extension  in  the  production  of 
commodities  than  in  the  production  of  the  money  ma- 
terial, there  was  a  discussion  of  the  question  as  to 
what  is  the  nature  of  "value,"  or  "real  value,"  and  as 
to  how  such  "value"  is  to  be  measured.  This  discus- 
sion had  a  bearing,  as  we  shall  see,  upon  our  own 
question  as  to  what  kind  of  value  it  is  in  which  money 
ought  to  be  stable;  yet  it  was  not  directly  concerned 
with  our  question.  Our  question  began  to  be  discussed 
in  the  last  quarter  of  the  nineteenth  century,  after 
another  fall  of  prices  had  set  in.  During  this  recent 
period  the  problem  has  been  several  times  posed  and 
debated,  though  never  ver}^  carefully  investigated.  It 
has  always  been  touched  upon  in  the  double  aspect  we 
have  just  described. 

§2.  Perhaps  the  first  notice  of  our  problem  was  made 
by  the  British  Gold  and  Silver  Commissioners,  in  their 
Third  Report,  rendered  in  1888.  Amongst  these  com- 
missioners a  difference  of  opinion  on  the  subject  came 
to  light.     The  six  commissioners  who  upheld  the  single 


14  INTRODUCTION 

gold  standard*  stated  that  "There  are  indeed  some  who 
think  that  in  an  ideally  perfect  system  of  currency, 
whatever  may  have  been  the  cause  of  an  alteration  in 
the  relation  of  the  standard  to  commodities,  the  stand- 
ard ought  to  adjust  itself  to  this  variation,  so  that 
prices  should  remain  constant ; "  and  they  expressed 
their  own  opinion  when  they  proceeded  to  ^ay.  "It 
may  be  questioned  whether  the  strict  idea  would  not 
require  that  the  constancy  of  obligation  aimed  at  should 
be  to  render  the  same  labor  rather  than  to  transfer  the 
same  commodities,  so  that  the  sacrifice  of  toil  in  repay- 
ing an  obligation  should  be  the  same  as  that  which  was 
involved  in  its  creation"  (Part  II.  §  21).  Their  own 
opinion  was  stated  also  in  this  way:  "It  is  of  the 
essence  of  a  good  standard  that  it  should  be  as  stable 
as  possible,  and  should  not  in  itself  be  subject  to 
causes  affecting  its  relation  to  commodities"  (§  72). 
Their  idea  was  that  the  relation  between  the  standard 
and  commodities  may  change,  as  happens  when  prices 
in  general  rise  or  fall,  but  if  this  change  be  due  to 
causes  primarily  affecting  the  commodities,  it  is  the 
commodities  that  are  changing,  and  not  the  standard, 
which  is  still  a  stable  one.  Evidently  it  is  a  stable  one 
only  in  relation  to  something  else  than  commodities, 
viz.  in  relation  to  labor,  that  is,  it  is  stable  either  in 
its  cost -value  or  in  its  esteem -value.  The  very  fact 
that  it  changes  in  its  relation  to  commodities  means 
that  it  is  changing  in  its  exchange-value  in  commodi- 
ties, and  as  there  is  no  exchange-value  except  in  com- 
modities, it  is  changing  simply  in  its  exchange -value. 
Of  course  the  terms  "appreciation"  and  "depreciation" 


*Herschell,   C.  W.  Freraantle,  J.  Lubbock,  T.  H.  Farrer,  J.  V7. 
Bircb,  l».  H.  Courtney. 


BISTORT   OF  THE    PROBLEM  15 

contain  the  same  ambiguities  as  the  term  "value,"  and 
tlie  gold-standard  Commissioners  were  perfectly  justified 
in  using  them  as  referring  to  changes  in  the  cost -value 
or  esteem -value  of  gold  and  silver  and  other  commodi- 
ties. That  they  used  the  terms  in  this  sense  is  appa- 
rent from  their  inquiry  as  to  whether  the  fall  of  prices 
was  due  to  an  appreciation  of  gold  or  to  a  depreciation 
of  commodities  or  to  a  combination  of  both  these  causes 
(cf.  §§  19,  49).  For  if  "appreciation"  and  "deprecia- 
tion" be  used  in  the  sense  of  changes  in  exchange- 
value,  in  the  fall  of  prices  admitted  they  had  ipso  facto 
an  appreciation  of  gold  to  the  inverse  of  the  fall  of  the 
general  level  of  prices,  but  not  such  a  depreciation  of 
commodities,  since  by  a  rise  of  gold  alone  all  other 
commodities  together  are  depressed  in  exchange-value 
only  to  an  infinitesimal  extent.*  Their  opponents, 
unfortunately,  the  six  bimetallists,t  did  not  altogether 
see  their  way  clearly,  although  they  maintained  the 
position  ascribed  to  them  by  the  monometallists;  for, 
instead  of  rejecting  the  method  of  solving  the  question 
entered  upon  by  the  latter,  they  merely  objected  to 
the  possibility  of  deciding  whether  the  causes  of  the 
changed  relation  between  gold  and  commodities  lay 
principally  on  the  side  of  gold  (Part  III.  §  11).  Both 
sides  failed  to  see  that  they  were  using  words  in  dif- 
ferent senses,  and  that  they  were  not  equipped  with 
suflBcient  nomenclature  to  reach  a  clear  decision.  Yet 
they  made  progress  in  striking  out  a  notice  of  the 
distinction  between  the  kinds  of  stability  in  value 
desired   in   the   monetary   standard. 

*0r  as  money  is  not  admitted  into  the  commodity  standard,  there 
is  no  depreciation  of  commodities,  however  much  their  prices  may  fall. 

tL.  Mallet,  A.  J.  Balfour,  H.  Chaplin,  p.  Barbour,  W.  H.  Houlds- 
worth,  S.  Montagu. 


16  INTRODUCTION 

One  of  the  gold -standard  Commissioners,  Mr. 
Courtney,  a  little  later,  in  an  article  in  tlie  Nine- 
teenth Century,  April  1893,  entitled  Bimetallism  Once 
More,  published  his  conversion  to  bimetallism.  But 
he  retained  his  former  conception  of  the  desideratum 
in  the  standard.  The  idea  that  for  our  "standard  of 
value"  "Ave  should  choose  some  substance  such  that  a 
given  weight  should  always  be  exchangeable  for,  as 
nearly  as  possible,  the  same  bundle  of  mixed  commodi- 
ties," he  pronounced  to  be  "the  common  answer"  most 
likely  to  be  first  given  (p.  621).  This  he  rejected,  and 
retained  the  conception  of  the  standard  previously 
adopted,  expressing  it  now  in  these  words:  "We  may 
aim  not  at  a  re-delivery  of  article  by  article,  but  at  a 
repaj-ment  of  labor  by  labor,  or  of  sacrifice  by  sacrifice; 
and  if  this  be  our  aim,  a  standard  should  be  something 
•which,  as  far  as  possible,  involves  the  same  labor,  and 
the  same  sacrifice  in  obtaining  it"  (p.  622).  His 
reason  for  desiring  an  increase  in  metallic  currency  by 
opening  the  mints  to  silver  was  based,  not  on  the  mere 
fall  of  prices,  but  on  the  ground  that  the  fall  of  prices 
had  gone  farther  than  could  be  accounted  for  by  the 
supposition  of  gold  being  stable  in  cost  and  in  value 
(i.  e.  in  cost-value).  At  the  same  time  he  disapproved 
of  the  single  silver  standard,  because,  while  silver  had 
remained  nearly  stable  in  comparison  with  the  average 
of  commodities,  it  had  fallen  with  them  in  cost.  There- 
fore he  concluded  that  "the  ideal  standard  of  recent 
j-ears  should  have  been  a  compound  of  the  two  metals" 
(p.  G27). 

§3.  Meantime  the  problem  had  been  broached  in 
this  country,  likewise  in  connection  with  the  bimetallic 
controversy.     In  the  Annals  of  the  American  Academy 


HISTORY  OF  THE   PROBLEM  17 

of  Political  and  Social  Science,  for  November  1892, 
appeared  an  article  by  Edward  A.  Ross  on  The  Standard 
of  Deferred  Payments.  Professor  Ross  here  assumed 
the  position  that  as  all  "agree  that  economic  justice 
consists  in  the  exchange  of  equal  values,  it  follows  that 
the  controversy  finally  hinges  on  the  nature  of  value" 
(pp.  41-42).  "The  bimetallist  asserts,"  he  continued, 
"that  equal  quantities  of  goods  are  of  equal  value, 
though  separated  by  a  period  of  time.  The  monomet- 
allist  holds  that  equal  quantities  of  labor  are  of  equal 
value,  though  separated  by  a  period  of  time."  And 
he  viewed  the  issue  as  "joined  between  the  two  great 
opposing  theories  of  value  —  that  of  labor-value  and 
that  of  use-value"  (p.  42).  This  way  of  stating  the 
question  is  hardly  the  right  way,  although  it  is  in 
accordance  with  the  way  the  question  has  generally 
been  treated.  It  has  generally  been  admitted  that  there 
are  two  or  more  contending  conceptions  and  theories  of 
value,  and  the  question  has  been  considered  to  be  as 
to  which  of  these  is  the  right  conception  and  theory  of 
value.  The  admission  rather  should  be  that  the  several 
different  conceptions  of  value  constitute  several  different 
kinds  of  value,  and  that  the  question  before  us  con- 
cerning the  stability  of  money  in  "value"  is  a  question 
merely  as  to  which  of  these  kinds  of  value  is  the  one 
here  applicable.  As  for  the  theories  of  value,  these 
are  mostly  found  to  be  at  bottom  theories  attempting 
to  explain  why  at  any  given  time  and  place  commodi- 
ties exchange  for  one  another  in  certain  amounts,  that 
is,  why  their  exchange-values  are  such  as  they  are. 
One  theory  asserts  that  two  things  exchange  for  each 
other  because  they  are  produced  by  the  same  quantity 
of  labor,  some  modification  and  definition  of  the  labor 


18  INTRODUCTION 

referred  to  being  necessary  to  fit  this  theory  to  facts. 
Another  theory  asserts  that  they  exchange  for  each 
other  because  they  contain  the  same  quantity  of  utility, 
some  modification  and  definition  of  the  utility  referred 
to  being  here  also  necessary.  Such  theories  have 
nothing  to  do  with  the  question  before  us.  It  may 
be  added  that  what  Professor  Ross  calls  the  conception 
of  "use- value"  is  nothing  else  than  the  conception  of 
exchange-value,  and  that  if  a  constant  exchange-value 
can  be  shown  to  be  a  constant  use -value  in  some  sense 
of  the  term  "use"  or  "utility,"  this  does  not  alter  its 
nature.  In  continuation.  Professor  Ross  urged  against 
the  labor  standard  the  very  strong  argument  that  when 
there  is  improved  production  the  quality  of  labor 
changes,  so  that  the  same  quantity  of  labor  repaid 
under  this  standard  is  not  the  same  quantity  of  the 
same  labor ;  wherefore  this  standard  belies  itself 
(p.  45).  Against  the  commodity  standard  he  made  no 
argument,  and  inclined  to  accept  it,  yet  deflected 
slightly  from  it  by  admitting  that  creditors  should  be 
enabled  to  keep  up  the  same  social  position,  which  may 
require  that  they  be  repaid  in  a  money  slightly  appre- 
ciating in  exchange -value.  This  he  called  a  standard 
of  "objective  utility"  (p.  49).  It  has  the  defect  that 
it  is  not  a  stable  standard  of  any  kind  of  value,  so  that 
he  virtually  ended  with  the  assertion  that  money  ought 
not  to  be  stable  in  value,  and  thereby  denied  the 
prime  point  of  agreement.  He  asserted,  however,  that 
his  standard  approaches  nearer  to  the  commodity 
standard  than  to  the  labor  standard. 

This  paper  was  soon  afterwards  criticized  in  the 
same  Annals,  for  January  1893,  by  Lucius  S.  Merriam 
in  a  paper  entitled  The  Theory  of  Final  Utility  in  its 


HISTORY   OF   THE   PROBLEM  19 

Relation  to  Money  and  the  Standard  of  Deferred  Pay- 
ments. Dr.  Merriam,  accepting  the  theory  of  value 
maintained  by  the  Austrian  School,  that  is,  holding  that 
the  relative  values  of  things  are  determined  by  their  rel- 
ative final  utilities,  considered  that  also  in  the  course  of 
time  equality  of  final  utility  constitutes  equality  of 
value  in  the  same  article  compared  with  itself.  In  other 
words,  he  identified  value  itself,  as  a  quantity,  with  final 
utility  (p.  101),  and  could  not  entertain  the  thought  of 
value  being  anything  else  than  this,  or  of  there  being 
any  other  kind  of  value.  It  is  curious  to  see  him  re- 
jecting the  commodity  standard  on  the  ground  that  "it 
involves  a  false  theory  of  value"  (p.  102).  For,  as  a 
matter  of  fact,  the  commodity  standard  does  not  involve 
any  "theory  of  value."  Theories  of  value,  to  repeat, 
are  attempts  at  explaining  exchange -values  as  they 
occur.  The  theory,  or  position,  that  money  should  be 
stable  in  exchange-value,  or  that  the  proper  standard 
for  deferred  payments  is  the  commodity  standard,  is 
wholly  independent  of  any  theory  attempting  to  find  the 
cause  of  exchange -values,  and  cannot  involve  any  such 
theory  in  itself,  whether  it  be  the  right  one  or  a  wrong 
one.  The  Austrian  theory  of  value,  so  far  as  it  ex- 
plains exchange-values  by  final  utilities,  may  be  the 
true  theory  of  value;  but  when  it  is  carried  on  as  a 
theory  pretending  to  assert  that  value  itself  is  wholly 
and  solely  final  utility,  it  is  itself  a  false  theory.  It 
may  be,  in  this  wider  way,  the  true  theory  of  esteem- 
value;  but  it  is  not,  in  this  way,  a  true  theory  of  value, 
since  it  is  not  applicable  to  all  the  kinds  of  value.  As 
a  theory  of  esteem -value,  it  may  fall  under  the  vague 
conception  of  "labor-value."  Dr.  Merriam  himself 
found  it  necessary  to  devote  some  space  to  distinguish 


20  INTRODUCTION 

his  "value"  from  what  he  called  "the  old  labor  theory 
of  value,"  meaning  what  is  here  called  "cost- value" 
(pp.  102-:03). 

Replying  in  the  Annals  for  November  1893,  in  an 
article  entitled  Total  Utility  Standard  of  Deferred  Pay- 
ments, Professor  Ross  modified  his  position  somewhat, 
and  now  stated  his  standard  to  be  one  of  "total  utility," 
and  substantially  identical  with  the  standard  he  had  be- 
fore adopted.  In  this  new  turn  given  to  the  dispute  we 
may  view  both  Professor  Ross  and  Dr.  Merriam  as  gro- 
ping after  the  true  conception  of  the  same  thing  —  after 
the  true  conception  of  stability  in  esteem -value.  We 
are,  then,  not  concerned  with  the  result  of  their  dispute 
(although,  in  this  aspect,  the  advantage  would  seem  to 
lie  with  Dr.  Merriam),  unless  it  be  first  decided  that 
money  ought  to  be  stable  in  esteem -value.* 

§4.  The  same  may  be  said  of  an  able  article  on  The 
Gold  Standard  in  Recent  Theory,  in  the  Political  Science 
Quarterly  for  September  1895,  by  John  B.  Clark,  the 
main  position  in  which  he  had  foreshadowed  in  an 
article  on  The  Ultimate  Standard  of  Value,  in  the  Yale 
Review  for  November  1892.  In  the  earlier  treatise 
Professor  Clark  had  found  the  measure  of  "value  "to 
lie  at  the  point  where  effective  utility  and  effective 
sacrifice  meet.  In  the  later  he  used  this  to  introduce 
a  compromise  between  the  cost  standard  and  the  com- 
modity standard.  The  doctrine  that  the  unit  of  value 
is  a  definite  amount  of  labor  measured  by  time,  say  an 
hour's  labor,  or  a  day's  labor  consisting  of  a  fixed 
number  of  hours,  he  would   transform  into  a  doctrine 


•Except,  of  course,  that  it  may  be  necessary  to  reach  some  tolerably 
definite  conception  of  esteem-value  before  it  can  be  decided  whether 
money  should  be  stable  in  this  or  in  some  other  kind  of  value. 


HISTORY   OF  THE   PROBLEM  21 

that  the  unit  of  value  is  a  day's  labor,  or  "an  unvary- 
ing fraction  of  an  average  day  of  labor,"  on  the  suppo- 
sition that  with  increasing  production  people  normally 
shorten  their  day's  labor.  According  to  Professor 
Clark,  a  debt  contracted  many  years  ago  when  the  day's 
labor  was  customarily  of  twelve  hours  should  now  be 
repaid  neither  with  the  same  average  of  commodities, 
which  may  now  perhaps  be  produced  in  the  same  num- 
ber of  days  with  eight  hours  of  daily  work,  nor  with 
the  product  of  the  same  number  of  hours  of  work 
(which  may  perhaps  be  fifty  per  cent,  more  average 
commodity),  but  with  the  product  of  the  same  number 
of  days'  work,  the  day's  work  being  now  customarilj-- 
of  ten  hours  (and  its  product  being  perhaps  twenty -five 
per  cent,  more  average  commodity).  He  sums  up  his 
position  by  saying:  "In  general,  the  ideal  unit  of 
deferred  payments  is  one  that,  as  the  productive  power 
of  labor  increases,  represents  more  and  more  commodi- 
ties and  fewer  and  fewer  hours  of  labor,"  but  the  same 
number  of  average  days  of  labor  (p.  399).  This  also 
is  a  modification  of  the  doctrine  that  money  ought  to 
be  stable  in  cost -value,  which  transmutes  it  into  a 
doctrine  that  money  ought  to  be  stable  in  esteem-value, 
and  it  is  a  further  attempt  at  finding  the  measure  of 
esteem -value  through  the  course  of  time.  Whatever 
success  Professor  Clark  may  claim  in  developing  the 
measure  of  this  kind  of  value,  he  gives  us  no  argu- 
ment to  show  that  money  ought  to  be  stable  in  this 
kind  of  value;  for  he  merely  made  at  the  outset  the  as- 
sumption that  "the  ideally  right"  sort  of  money  is 
one  which  "will  divide  equally  between  debtor  and 
creditor  the  gains  that  come  through  industrial  progress  " 
(p.    398),    which    is    really    one  of    the    questions    at 


22  INTRODUCTION 

issue.*  Professor  Clark's  conception  of  the  measure  of 
this  kind  of  value,  however  great  its  merits,  has  not  been 
widely  accepted,  and  the  conception  of  stability  in  es- 
teeiu- value  may  still  be  said  to  be  unsettled,  so  that  there 
remains  in  economics  an  important  problem  to  define 
and  determine  this  conception.  But  every  economist 
should  bear  in  mind  that  the  problem  of  determining 
what  is  stability  of  esteem -value  is  one  thing,  and  that 
another  is  the  problem  of  deciding  whether  money  ought 
to  be  stable  in  esteem -value  or  in  some  other  kind  of 
value,  t 

§  5.  At  about  the  same  time  with  these  writings  the 
problem  was  also  noticed  by  J.  Cummings  in  a  paper  on 
Monetary  Standards,  in  the  Journal  cf  Political  Econ- 
omj^  Chicago,  June  1894.  Dr.  Cummings  pointed  out 
two  conceptions  of  the  standard  of  value,  as  (1)  one 


*It  may  also  be  doubted  whether  in  practice  this  standard  would 
divide  the  gains  equally.  It  would  seem,  like  Merriam's,  to  benefit  the 
creditor  more  than  the  debtor. 

tVery  curiously  Clark  himself  inclines  to  attach  much  importance 
to  the  conception  of  exchange-value.  At  the  commencement  of  this 
article,  and  in  another,  i'Vee  coinage  and  prosperity,  in  the  same  Quar- 
terly for  June  1896,  he  took  up  the  position  that  what  is  desirable  in 
money  is  not  so  much  constancy  in  purchasing  power  as  steadiness  or 
uniformity  in  its  chapge  in  purchasing  power  {i.  e.  exchange-value), 
whether  toward  appreciation  or  toward  depreciation,  holding  that  a 
change  in  the  rate  of  interest  may  "correct"  the  steady  variation  in  the 
purchasing  power,  and  so  put  the  relation  between  creditor  and  debtor  in 
the  same  position  as  they  would  have  been  in  with  "  a  currency  of  a  per- 
fectly stable  value"  (the  meaning  of  "value"  here  always  being  pur- 
chasing power  or  exchange-value).  Thus,  after  all,  stability  in  ex- 
change-value, and  not  stability  according  to  his  own  measure  of  "value," 
is  the  norm.  (Or  if  Clark  was  throughout  this  paper  supposing  the 
economic  conditions  to  be  stationary,  so  that  exchange-value  and  esteem- 
value  would  coincide,  his  permission  of  steady  appreciation  or  deprecia- 
tion, both  in  exchange-value  and  in  esteem-value,  is  a  denial  of  the  need 
of  money  being  an  accurate  measure  and  standard  of  value,  and  so  no 
lonf^er  concerns  us.) 


HISTORY  OF   THE   PROBLEM  23 

which  varies  with  the  average  cost  of  producing  com- 
modities, and  (2)  one  which  does  not  so  vary.  Yet  he 
conceived  of  the  former  as  being,  nowadays,  a  "decli- 
ning standard,"  which  "allows  prices  to  remain  fixed  as 
the  productiveness  of  industry  increases,"  while  he  con- 
sidered the  latter  to  be  the  "absolutely  fixed  standard," 
which  "permits  prices  to  fall  under  such  conditions" 
(pp.  354-5).  It  is  evident  that  he  uses  "value"  in  the 
sense  of  cost-value,  and  his  only  conception  of  stability 
of  value  is  stability  of  cost-value.  In  another  passage 
he  uses  "appreciation  of  gold"  in  the  sense  of  growing 
dearer  in  cost-value,  although  he  was  combating  people 
who  meant  by  it  growing  dearer  in  exchange -value 
(pp.  364-5).  It  is  somewhat  strange,  then,  that  with 
only  one  conception  of  "value"  he  should  entertain  two 
conceptions  of  the  "standard  of  value." 

A  little  later  the  distinction  between  the  commodity 
and  labor  standards  was  again  pointed  out  by  Henry 
Farquhar  in  a  paper  entitled  A  Stable  Monetary  Standard, 
published  in  the  New  York  Reform  Club's  "Sound  Cur- 
rency" of  July  1,  1895  (p.  6).  Rather  curiously,  after 
stating  the  incontestability  of  the  doctrine  that  "  sta- 
bility in  value  is  the  essential  requisite  of  the  monetary 
standard,"  Mr.  Farquhar  proceeds  to  ask  "what  shall 
constitute  stability?"  (p.  3),  thus  placing  the  trouble 
in  the  definite  idea  of  "stability"  instead  of  finding  it 
in  the  vague  idea  of  "value."  He  defines  stability  as 
"ability  to  resist  disturbing  forces,"  and  so  would  seem 
to  get  a  bias  in  favor  of  stability  in  cost-value.  This, 
however,  is  not  the  ease.  He  rejects  both  the  two 
standards  suggested.  He  rejects  the  commodity  stand- 
ard because,  misinterpreting  Professor  Ross,  he  con- 
ceives that  "it  substitutes  use-value  for  exchange -value. 


24  INTRODUCTION 

where  the  latter  is  manifestly  the  thing  sought"  (p.  7). 
It  is  true,  to  repeat,  that  the  commodity  standard  may, 
or  may  not,  involve  stability  in  use -value,  but  this  does 
not  show  that  it  excludes  stability  in  exchange -value. 
Stability  in  exchange -value  is  precisely  what  the  com- 
modity standard  does  provide,  so  that  if  Mr.  Farquhar 
could  be  kept  to  the  last  statement,  he  would  have  to 
accept  the  commoditj^  standard  alone.  The  labor 
standard  he  rejects  for  the  reason  already  given  by 
Professor  Ross,  from  whom  he  acknowledges  obtaining 
it.  Rejecting  both  these  standards  separately,  Mr. 
Farquhar  accepts  both  of  them  together,  in  a  sort  of 
composite  standard,  and  wants  wages  to  be  "admitted 
on  equal  terms  with  prices  in  making  our  estimate " 
(?■&.),  and  considers  "the  best  standard  of  value"  to  be 
"one  whose  changes  were  intermediate  between  those  of 
wages  and  those  of  prices"  (p.  13).  We  may  add,  for 
definiteness,  that  because  of  this  use  of  wages,  this 
composite  standard  is  a  mixture,  not  of  exchange -value 
and  cost -value,  but  of  exchange -value  and  esteem- 
value.  And  it  would  seem  to  be  condemned  at  the  out- 
set by  the  fact  that  it  is  not  a  standard  of  any  one 
kind  of  value. 

In  December  of  the  same  year,  at  Indianapolis,  the 
American  Economic  Association,  at  their  Eighth  Annual 
Meeting,  the  Report  of  which  was  published  as  a  Sup- 
plement to  Economic  Studies,  Vol.  I.  No,  1,  April  1896, 
debated  the  question  whether  it  is  necessary  that  the 
general  level  of  prices  should  be  stable  {i.e.  that  money 
should  be  stable  in  exchange- value),  to  which  the  only 
alternative  advanced  was  the  opinion  that  all  is  well  so 
long  as  prices  do  not  fall  enough  to  overbalance  im- 
provements in  production  and  increase  of  output  {i.e. 


HISTORY  OF  THE  PROBLEM  ^5 

SO  long  as  money  does  not  fall  in  cost -value  or  esteem- 
value).  Two  members  advocated  this  position,  against 
six  for  the  other.* 

Again  in  the  Annals  of  the  American  Academy  of 
Political  and  Social  Science,  for _  March  1896,  the 
problem  was  attacked  by  J.  Allen  Smith  in  an  article 
entitled  The  Multiple  Money  Standard.  Here,  under 
the  caption  of  "Two  Conceptions  of  a  Standard  of 
Value,"  Professor  Smith  states  that  "The  gold  mono- 
metallists  stand  for  one  conception  of  a  standard;  the 
bimetallists  and  paper  money  advocates  for  another. 
The  former  tell  us  that  the  ideal  standard  is  one  which 
represents  the  product  of  a  constant  quantity  of  labor; 
the  latter  say  that  it  is  a  constant  quantity  of  com- 
modity" (p.  9).  As  his  title  implies,  Professor  Smith 
entirely  accepts  the  latter  position,  and  so  is  an  advo- 
cate of  stability  of  money  in  exchange -value;  and  the 
greater  part  of  his  paper  is  devoted  to  working  out  and 
defending  a  plan  by  which  such  money  may  be  secured. 

Lastly,  the  question  was  noticed  by  F.  Y.  Edgeworth 
in  an  article  on  Index  Numhers  in  the  second  volume  of 
Palgrave's  Dictionary  of  Political  Economy,  London, 
1896.  Professor  Edgeworth  remarks  that  for  the  pur- 
pose of  serving  as  a  standard  of  deferred  payments 
"two  methods  present  themselves,  viz.  to  arrange  that 
the  debtor  shall  pay,  the  creditor  receive,  either  (1)  the 
same  quantity  of  goods  and  services,  the  same  amount 
of  utility,  so  to  speak;  or  (2)  the  product  of  the  same 
quantity  of  labor,  or  more  exact)}',  effort  and  sacrifice" 


♦The  two  were  F.  W.  Taussig  (pp.  68,  80  of  the  Report)  and  W.  A. 
Scott  (p.  83);  the  six,  W.  Fisher  (pp.  03,  71-2i,  S.  Sherwood  (p.  86),  J. 
H.  Gray  (pp.  88-9),  E.  A.  Ross  (pp.  64-5,  91-2),  H.  H.  Powers  (pp. 
72-3),  and  A.  J.  Warner  (pp.  70-1,  95). 


26  INTRODUCTION 

(p.  385).  "The  former,"  he  says,  "has  been  more  gen- 
erally accepted;"  and  he  particularly  notes  the  fact  that 
it  was  adopted  by  the  British  Association's  Committee 
appointed  in  1886  for  investigating  the  best  methods  of 
ascertaining  and  measuring  variations  in  the  "value" 
of  the  monetary  standard,  as  being  par  excellence  the 
measure  in  question.  He  himself  adds  that  there  are 
weighty  considerations  for  the  latter,  but  does  not 
further  pursue  the  subject.* 


CHAPTER   m 

IMPORTANCE    OF    THE    PROBLEM 

§1.  The  importance  of  our  problem  is  well  brought 
out  by  this  review  of  its  brief  history.  Our  problem  is 
one  of  those  theoretical  ones  which  have  untold  influ- 
ence in  practical  applications.  It  may  be  that  no 
government  will  ever  avowedly  attempt  to  regulate  a 
system  of  money  with  a  view  to  keeping  it  stable  in 
value  of  any  sort.  Yet  all  governments  have  almost 
always,    in   their   decisions   about    the   adoption   of    a 


*The  question  about  theso  two  standards  has  also  been  several  times 
discussed  in  recent  works,  as  by  H.  J.  Davenport  and  L.  Darwin,  whose 
opinions  will  be  noticed  later.  It  has  been  somewhat  lip:htly  treated  by 
F.  Fetter  in  The  exploitation  of  theories  of  value  in  the  disctission  of  the 
standard  of  deferred  payments,  in  the  Publications  of  the  American 
Academy  of  Political  and  Social  Science,  May  ]89o,  without  reaching 
any  satisfactory  conclusion.  It  was  also  touched  upon  by  R.  Mayo- 
Smith,  who  withheld  ,iudg:ment,  although  inclining:  to  the  view  that 
money  should  be  a  stable  standard  rather  of  producing:  power  than  of 
purchasing  power,  Money  and  prices,  Political  Science  Quarterly,  .June 
1900,  pp.  212,  214  ;  cf.  also  Prices  and  individual  welfare,  in  the  same 
Quarterly,  March  1900,  p.  36.  / 


IMPORTANCE    OF   THE   PROBLEM  2T 

monetary  system  and  about  alteration  of  its  minor  or 
major  details,  been  influenced  by  the  reigning  views 
about  stability  of  value.  And  if  we  view  economics 
as  a  science,  in  which  a  department  is  the  science  of 
money,  it  is  intolerable  to  think  that  in  its  most  im- 
portant technical  term,  of  a  concept  which  plays  the 
same  role  as  that  of  energy  or  force  in  physics,*  there 
still  exists  an  ambiguity  which  leads  different  minds  to 
mean  different  things  by  the  same  word.  An  example 
may  illustrate  the  point.  An  economist,  who  was  also 
a  legislator,  G.  Poulett  Scrope,  once  wrote  as  follows: 
"When  a  government  sets  about  the  regulation  of  the 
monetary  system  of  a  country,  the  very  first  object  for 
consideration  should  be  the  means  of  rendering  its 
money  as  invariable  in  value  as  possible."  t  And 
recently  a  German  economist,  Dr.  Karl  Helfferich,  has 
laid  down  the  following  proposition:  "To  prevent,  as 
far  as  possible,  variations  in  the  value  of  money,  and 
to  reduce  to  the  smallest  extent  unavoidable  variations, 
whether  upwards  or  downwards,  is  the  first  task  of 
monetary  polity. "t  In  these  two  passages  the  words 
are  almost  the  same,  and  consequently  the  ideas  seem 
to  be  the  same.  They  both  inculcate  that  the  monetary 
policy  of   government   should   aim  at   keeping   money 


*Cf.  "Value  is  preeminently  the  eco7iotnic  quality  of  things,  as  weight 
is  a  physical  qualify,  as  the  faculty  of  combining  with  such  or  such  a 
body  is  a  chemical  property,"  A.  Jourdan,  Coiirs  analytique  d'  iconomie 
politique,  Paris,  1882,  p.  426. 

f Principles  of  political  economy,  London,  1833,  p.  404.  A  few 
years  earlier  another  Member  of  Parliament  had  written:  "The  first 
object  of  legislation  upon  the  money  of  a  country  should  undoubtedly  be 
to  keep  its  value  as  invariable  as  possible,"  C.  C.  Western,  A  letter  on 
the  present  distress  of  the  country,  addressed  to  his  Constituents, 
Chelmsford.  1829,  p.  12. 

tDie  Wdhrungsfrage,  Stuttgart,  1895,  p.  23. 


28  INTRODUCTION 

stable  in  value.  This  is  the  most  fundamental  precept 
which  political  economy  can  give  to  government  for 
its  regulation  of  the  monetary  system.  And  yet,  as 
may  be  found  by  examining  the  context  in  which  these 
passages  occur,  they  mean  entirely  diiferent  things. 
It  would  be  impossible  for  government,  during  a 
period  of  progress,  to  follow  the  advice  given  in  almost 
identical  terms  by  these  two  economists.  If  a  govern- 
ment followed  the  advice  as  intended  by  Scrope,  it 
would  not  be  following,  and  could  not  follow,  the  advice 
as  intended  by  Helfferich,  and  conversely.  Or  if  one 
government  followed  the  advice  of  the  one,  and  another 
government  followed  the  advice  of  the  other,  their 
moneys  would  not  long  retain  the  same  value.  For  by 
"value"  Scrope  meant  exchange -value,*  and  Helfferich 
meant  some  sort  of  esteem-value,  at  least  definite 
enough  to  be  totally  distinct  from  exchange -value,  so 
that  a  monetary  standard  which  the  one  would  denounce 
as  appreciating,  the  other  might  recommend  as  stable. t 
Not  long  ago  a  Parliamentary  Report  contained 
these  words:  "If  it  be  right  that  a  government  should 
adopt  and  impose  upon  its  people  a  legal  standard  of 
value,  it  is  clearly  its  duty  to  provide,  as  far  as  pos- 
sible, that  such  standard  shall  not  be  wanting  in  its 
most  essential  attribute,  viz.  that  of  the  greatest  attain- 
able stability."     The  reader  may  be  challenged  to  tell 

*So  also  Western. 

tApparently  the  same  proposition  was  made  also  by  McCulloch  in 
these  words:  "It  is  the  duty  of  government  to  take  care  that  the  value 
of  the  currency  be  as  invariable  as  possible,"  Note  on  Money  in  his 
double-column  edition  (18G3)  of  the  Wealth  of  nations,  p_  502  b. 
But  the  end  of  the  sentence  shows  that  all  he  meant  was  that  govern- 
ment ought  to  see  to  it  that  paper  money  should  remain  of  the  same 
value  with  metallic  money  — should  be  invariable  in  intrinsic  value, 
however  much  it  might  vary  in  other  kinds  of  value. 


IMPORTANCE   OF  THE   PROBLEM  29 

the  meaning  of  this  weighty  admonition.  He  cannot  do 
so  unless  he  discovers  where  it  occurs,  who  wrote  it, 
and  what  are  the  opinions,  elsewhere  expressed,  of  its 
authors. 

Economics  can  never  be  taken  seriously  so  long  as 
its  adepts  continue  in  this  way  to  play  with  words.* 

§2.  It  would  be  well,  therefore,  if  economists  would 
pause  to  devote  some  time  to  the  investigation  of  this 
question.  Some  aid  may  be  rendered  by  reviewing  the 
opinions  of  the  great  and  of  the  small  among  past  econ- 
omists, and  by  pointing  out  the  positions  more  or  less 
carelessly  assumed  and  more  or  less  tenaciously  held  by 
living  economists.  For,  although  the  problem  has 
only  recently  been  brought  to  consciousness  by  a  few 
inquirers,  yet  from  the  beginning,  in  treating  of  the 
nature  of  value,  writers  on  economics  have  fallen  into 
opposing  views.  Examination  of  their  tenets  will  not 
only  disclose  the  unsatisfactory  condition  of  the  science, 
but  also  throw  some  light  on  the  question  itself  by 
compelling  notice  of  the  reasons  assigned.  We  may 
begiu  by  surveying  in  historical  order,  along  different 
lines,  the  doctrines  of  economists  during  the  past  three 

*As  long  ago  as  1836  Malthus  wrote:  "It  is  not  a  little  discreditable 
to  a  branch  of  knowledge  whicli  claims  to  be  called  a  science,  that  the 
meaning  of  a  terra  which  is  constantly  met  with  in  every  work  on  politi- 
cal economy,  and  constantly  heard  in  every  conversation  on  the  subject, 
should  not  yet  be  settled,"  Principles  of  political  economy,  2d  ed.,p.  118. 
But  Malthus  himself,  as  we  shall  see,  made  the  mistake  of  wishing  us 
to  use  the  generic  term  "value"  in  the  sense  of  only  one  of  its  species, 
which  is  something  mankind  is  not  likely  ever  to  be  brought  to  do.  He 
even  went  further,  and  wanted  the  name  of  one  of  the  species,  "ex- 
changeable value,"  to  be  used  only  in  the  sense  of  one  of  the  other  spe- 
cies, which  is  something  mankind  certainly  will  never  be  brought  to  do. 
How  much  simpler  would  it  have  been,  had  he  advised  economists  to 
recognize  the  different  meanings  of  the  generic  term  "value"  and  always 
to  specify  to  which  of  the  species  of  value  they  are  referring. 


30  INTRODUCTION 

or  four  centuries;  and  may  then  systematically  analyze 
and  classify  the  different  opinions,  the  ways  of  express- 
ing them,  and  the  authorities  for  them.  Finally,  some 
notes  may  be  added  about  the  nature  of  the  question, 
some  hints  about  the  method  of  solving  it,  and  some 
arguments  for  one  of  the  solutions. 


PART   11.    HISTORICAL   SURVEY 


CHAPTER  I 

EARLY    ECONOMISTS 

§1.  The  search  after  a  better  standard  of  value  than 
current  money  —  after  a  stable  standard  whereby  to 
judge  the  fluctuating  monetary  standard  —  may  be 
traced  back  to  the  sixteenth  century.  Then  we  find 
complaints  about  the  great  rise  of  prices.*  That 
rise  of  prices  was  due  to  two  causes,  the  so-called 
augmentations  of  the  monetary  standards,  and  the 
actual  depreciation  of  gold  and  silver  because  of  their 
multiplication  since  the  discovery  of  America.  When 
these  two  causes  were  distinguished, t  fault  was  found 
with  gold  and  silver  for  not  keeping  their  value,  because 
they  permitted  a  rise  of  the  prices  not  only  of  luxuries 
but  of  necessaries.  The  reference  is  evidently  to  the  ex- 
change-value of  money.  A  distinct  mention  of  the  com- 
modity standard — at  least  of  the  standard  of  necessaries, 
— in  connection  with  contracts,  is  to  be  found  in  the  great 


•In  Germany  so  early  as  1541  by  Joannes  Virdunginus  (Regraulensis) 
in  the  Introduction  to  his  edition  of  the  monetary  tracts  of  Gabriel  Biel, 
Joannes  Aquila,  and  Bilibaldus  Pirckeynihero.  In  England  by  Latimer 
in  his  sermons  of  March  8th  and  22d,  1549. 

tBy  J.  Bodin  in  his  JResponce  aiix  paradoxes  de  M.  de  Malestroict 
touchant  Venchirissement  de  toiites  les  choses  et  les  monnoyes,  Paris, 
1568.  Malestroit,  who  wrote  in  1506,  had  recognized  only  the  former 
cause. 

(31) 


32  HISTORICAL    SURVEY 

work  of  Grotius,  published  in  1625  (II,  xii,  17).  Wri- 
ting iu  1683,  Montanari,  one  of  the  most  profound  of 
the  early  Italian  writers  on  money,  asserted  that  silver 
(money)  is  dear  or  cheap  only  in  comparison  with  the 
things  with  which  it  is  exchanged,  and  that  as  silver 
measures  things,  so  it  is  itself  measured  by  things.* 
And  although  another  standard  seems  to  be  used,  yet  it 
is  really  this  standard  that  was  ultimately  appealed  to 
by  Rice  Vaughan,  when,  in  1675,  he  wrote:  "There  is 
only  one  thing  from  whence  we  may  certainly  track  out 
the  prices,  and  which  carries  with  it  a  constant  resul- 
tance  of  the  prices  of  all  other  things  which  are  neces- 
sary for  a  man's  life;  and  that  is  the  price  of  laborers' 
or  servants'  wages,  especially  those  of  the  meaner 
sort."  t  Here  the  variations  in  wages  are  taken  merely 
as  a  convenient  means  of  finding  the  variations  in  the 
general  level  of  the  prices  of  necessaries,  so  that  the 
level  of  prices  is  conceived  as  the  real  measure.  A  little 
later,  in  1691,  Sir  William  Petty,  who  was  one  of  the 
early  upholders  of  the  doctrine  that  things  exchange  for 
one  another  according  to  the  comparative  labor  required 
to  produce  tliem,t  asserted  that  "the  day's  food  of  an 
adult  man,  at  a  medium,  and  not  the  day's  labor,  is  the 
common   measure   of    value."  ||      This  passage   implies 

•Vol.  I.  pp.  90-1,  of  Custodi's  edition. 

^Discourse  of  coin  and  coinage,  ch.  x.  Quoted  from  Dugald  Stew- 
art's Lectures  on  political  economy,  Hamilton's  edition,  Vol.  I.  p.  3G4. 

XTreatise  of  taxes  and  eontribafions,  London,  1GG2,  p.  25,  calling  it 
"the  foundation  of  equallizing  and  ballancing  of  values." 

\\  Political  anatomy  of  Ireland,  London,  1G91,  p.  C5.  Petty  held  that 
"all  things  ought  to  be  v.alued  by  two  natural  denominations,  which  is 
land  and  labor,"  and  then  wanted  "a  natural  par  between  land  and 
labor,"  Treatise  of  taxes,  etc.,  p.  2G.  In  the  Political  anatomy  he  re- 
verted to  this,  and  seeking  "how  to  make  a  par  and  equation  between 
lands  and  labor,  so  as  to  express  the  value  of  anything  by  either  alone," 
p.  63,  he  hit  upon  the  above  as  the  solution. 


EARLY  ECONOMISTS  33 

that  he  would  measure  variations  in  the  exchange-value 
of  money  by  the  prices — not,  like  Vaughan,  of  all  the 
necessaries,  but  —  of  the  few  principal  necessaries  which 
constitute  food.     And  at  the  same  time  a  still  more  nar- 
rowed   view    was    advanced    by    Locke,    who    wrote: 
"Wheat    in  this  part  of   the    world    (and  that  grain, 
which  is  the  constant  general  food  of  any  other  country) 
is  the  fittest  measure  to  judge  of  the  altered  value  of 
things,  in  any  long  tract  of  time."  *     In  the  use  of  foodi 
alone  we  have  a  limitation  of  the  commodity  standard/ 
from  all  to  only  a  few  things,  and  in  the  use  of  wheat' 
alone   we    have    the    final    subtilization   of    it    to    itsi 
disappearance.! 

§2.  Locke's  reason  for  this  subtilization  was  that 
in  the  principal  article  of  food  he  supposed  "there  is 
constantly  the  same  quantity  of  it  in  proportion  to  its 
vent,"  there  being  in  this  article  a  "more  studied  and 

*  Op.  cit.  p.  47. 

t  Already  under  Elizabeth  an  ordinance  had  required  the  colleges  of 
Oxford  and  Cambridge  to  make  their  leases  one-third  in  wheat.  This 
was  not  an  emploj'ment  of  the  wheat  standard.  Wheat  can  be  employed 
as  a  standard  only  by  parties  neither  of  whom  produce  wheat.  Such 
wheat  leases  were  in  essence  a  withdrawal  from  the  use  of  money  and  a 
return  to  demand  for  payment  in  kind.  A  true  use  of  the  wheat  stand-, 
ard  was,  for  instance,  proposed  by  Jefferson,  in  1783,  when  he  advised ' 
paying  the  Virginia  assemblymen  daily  wages  in  sums  of  money  repre-J 
senting  the  average  price  of  two  bushels  of  wheat  during  the  preceding! 
ten  years.  See  Jefferson's  Works,  Washington  edition,  Vol.  VIII.  pp. 
414-5,  and  cf.  p.  450.  In  France  the  payment  of  contracts  in  assignats 
according  to  the  price  of  wheat  was  proposed  in  1790  by  Jean-Bon-Saint- 
Andr^  (see  Thiers,  Ilistoire,  Vol.  VII.  p.  198),  and  a  plan  like  Jeffer- 
son's of  paying  members  of  the  legislature  according  to  the  "value" 
(=price)  of  a  certain  quantity  of  wheat  was  actually  incorporated  in  the 
Constitution  of  5  fructidor  an  III.  (1795)  art.  G8.  In  Germany  a  proposal 
like  Jefferson's  was  extended  to  all  government  dealings  by  Soden  in  his 
Nationaloekonomie,  Vol.  II.  pp.  338  ff.  (according  to  Roscher,  §  129). 
And  in  England,  again,  the  wheat  standard  was  advocated  and  debated 
in  Parliament  in  1822. 


34  HISTORICAL    SURVEY 

designed"  proportion  of  its  provision  to  its  consump- 
tion. The  idea  now  is  that  some  one  thing  is  more 
stable  in  value  than  other  things,  and  that  it  is  better, 
as  well  as  more  convenient,  to  use  this  one  thing  for 
the  measure  of  value,  than  to  use  all  things.  This  idea 
is  right  enough  so  far  as  it  goes;  but  it  omits  to  notice 
that  the  most  accurate  test  to  show  that  the  one  thing 
really  does  behave  in  the  way  supposed  is  its  relation  to 
all  other  things,  so  that  the  multiple  standard  is  the 
ultimate  standard  after  all.  But  wheat,  or  any  other 
food,  is  so  far  from  behaving  in  the  way  supposed  that 
it  may  be  rejected  on  very  little  observation.  Of  course 
no  reliance  should  be  put  upon  the  general  principle 
that  over  long  periods  (of  "seven  or  twenty  years,"  in 
Locke's  words)  the  provision  is  adapted  to  the  con- 
sumption; for,  in  one  sense,  the  provision  of  every  kind 
of  thing  is  adapted  to  its  consumption,  as  there  is 
hardly  more  waste  in  one  line  of  industry  than  in 
another.  In  speaking  of  the  provision  being  adapted 
to  the  consumption,  or  the  quantity  to  the  vent,  Locke 
must  have  meant  what  is  now  expressed  by  the  phrase, 
adaptation  of  the  supply  to  the  demand.  But  we  know 
very  well  that  even  over  long  periods  not  only  all 
people  in  general,  but  even  the  lower  and  "meaner" 
classes,  are  differently  supplied  with  food,  their  demand 
in  one  sense  remaining  the  same  and  in  another  inde- 
pendently varying.  Hence  the  opinion  is  worthless 
that  the  principal  food  stuff  will  be  of  the  same  value 
over  long  periods;  and  any  such  article  is  unfit  to  be 
taken  as  a  good  standard  of  value  in  any  sense  of  the 
term  "value,"  although,  perhaps,  in  some  sense  or 
senses  of  this  term,  such  an  article  may  be  a  better 
standard  than  gold  and  silver  have  proved  themselves. 


EARLY  ECONOMISTS  35 

In  the  idea  that  a  thing  will  be  stable  in  "value"  if 
the  relation  between  its  supply  and  demand  remains 
constant,  there  resides  a  double  meaning,  introduced 
by  the  double  meaning  in  the  word  "demand."  For 
the  word  "demand"  means  either  the  offer  of  other 
things  in  exchange  for  the  thing  supplied,  or  the  desire 
for  the  thing  supplied.  In  the  former  sense,  constancy 
between  the  supply  and  demand  of  a  thing  would  indeed 
mean  its  constancy  in  exchange -value;  but  in  the  latter 
sense,  constancy  between  the  supply  and  demand  of  a 
thing  would  mean  its  constancy  in  esteem -value.  In 
the  latter  case  the  idea  is  that  the  thing  is  supplied  in 
quantity  sufficient  to  yield  a  constant  amount  of  satis- 
faction, thereby  awakening  in  people  a  constant  amount 
of  esteem  for  it;  whereas  in  the  former  case  the  idea  is 
that  the  thing  is  supplied  in  quantity  sufficient  to  yield 
an  amount  of  satisfaction  which  retains  a  constant  pro- 
portion to  the  amounts  of  satisfaction  yielded  by  the 
supplies  of  all  things  collectively,  or  on  the  average, 
thereby  awakening  in  people  an  amount  of  esteem  equal 
to  the  average  amount  of  esteem  awakened  in  them  by 
all  other  things.  Now,  when  Locke  spoke  of  the  pro- 
vision of  wheat  being  better  adapted  to  the  consumption 
or  vent  of  it,  and  so  resulting  in  wheat  being  a  better 
measure  of  value  than  silver,  he  had  in  mind  on  both 
sides  only  the  quantities  of  wheat  supplied  and  the 
quantities  of  other  things  offered  in  exchange  for  it. 
He  referred  only  to  exchange-value,  and  wanted  for 
the  standard  an  article  stable  in  exchange-value.* 


•Locke  divided  value  into  "intrinsic  worth"  or  "intrinsic  value" 
(the  same  as  use-value)  and  "marketable  value"  (the  same  as  exchange- 
value),  pp.  42-3.  He  used  "value"  prenerally  in  this  latter  sense,  as  also 
in  this  sense  the  term  "price,"  cf.  p.  41.     (For  "value"  as  exchangre- 


36  HISIORICAL    SURVEY 

Some  time  later  the  idea  of  adaptation  of  supply  to 
demand  in  the  sense  of  desire  came  to  the  front.  This 
we  find  in  Condillac,  who  wrote  in  1776.  CoDdillac  as- 
serted: "A  commodity  would  always  have  the  same 
value  if,  always  equally  necessary,  it  were  at  all  times 
and  places  in  the  same  quantity  relatively  to  the  need 
for  it.  Then  it  would  be  a  measure  whereby  we  could 
appreciate  the  value  of  silver  [monej-]  through  all  ages 
and  in  all  regions.  Wheat  is  this  commodity."*  Here 
the  standard  of  "value"  has  been  converted  into  a 
standard  of  esteem-value,  although  this  conversion  was 
not  recognized,  through  lack  of  recognizing  the  various 
senses  of  the  term  "value."  Two  of  these  senses  being 
in  the  same  year  distinguished  by  Adam  Smith,!  this 

value  see  p.  40,  and  cf.  pp.  34,  35,  especially  this:  "it  [money]  has  not 
at  all  a  more  stable,  settled  value,  in  exchange  with  other  things,  than 
any  other  commodity  has;  but  a  more  known  one,"  p.  34;  see  also  pp. 
46,  82,  154,  179-80.  On  p.  30  he  speaks  of  a  balancing  of  money  with 
commodities,  and  of  the  "value  "of  money  being  lower  the  higher  the 
prices  of  commodities,  and  conversely.  But  this  is  given  as  not  his  own 
opinion.  On  pp.  44-5  be  says  that,  prices  varying,  the  change  of  values 
is  in  the  commodities,  and  not  in  money,  if  the  quantity  of  money  is 
constant;  but  it  is  in  the  money  if  the  quantity  of  money  varies,  and 
not  in  the  commodities  if  their  quantities  are  equable  compared  with 
their  vent.  This  is  a  false  theory  of  the  value  of  money,  which  makes 
it  difficult  for  us  to  determine  his  real  meaning.  Money,  we  should 
notice,  he  here  treated  differently  from  commodities,  its  value  being 
made  to  depend  on  its  own  quantity  merely,  while  the  value  of  a  com- 
modity is  made  to  depend  upon  a  balancing  between  its  quantity  or  sup- 
ply and  its  vent  or  the  demand  for  it.  But  again,  on  pp.  49,  50,  82,  the 
balancing  reappears  in  the  case  of  money  also.— As  regards  the  corn 
standard,  Locke  was  confusedly  followed  by  Pagnini,  Siil  valore  deJV 
oro  e  deir  argevfo,  etc.  1765,  in  ed.  Custodi,  p.  302;  compare  p.  303 
with  Tjocke,  p.  170. 

*Le  commerce  ef  le  qovvernemevf,  in  his  Oeuvrea  completes,  Paris, 
1821.  Vol.  IV.  pp.  179-80.  He  adds  that  wheat  can  have  this  property 
only  if  its  commerce  is  unrestricted,  pp.  180-1. 

tAlthough  his  division  of  value  was  nothing  else  than  Locke's, 
under  more  appropriate  terms. 


EARLY  ECONOMISTS  37 

standard  was  afterwards  wrongly  taken  by  Dugald 
Stewart  for  a  standard  of  use- value.*  Dugald  Stewart 
himself  adopted  this  position,  and  then  as  a  convenient 
means  of  finding  variations  in  the  price  of  corn 
(whereby  to  gauge  the  variations  iu  the  value  of 
money)  he  recommended  the  use  of  the  "wages  of 
labor."  In  doing  this  he  followed  the  example  of  Rice 
Vaughan,  but  with  the  slight  change  that  while 
Vaughau  thought  that  wages  followed  the  variations  in 
the  prices  of  all  the  necessaries  together,  Stewart 
thought  that  they  followed  the  variations  principally  of 
the  prices  of  corn,  although  he,  too,  added  "and  the 
necessaries  of  life."  He  noticed  also  that  he  was  ex- 
actly inverting  the  order  adopted  by  Adam  Smith. t  It 
is  hardly  necessary  to  point  out  that  wheat,  or  corn  in 
general,  or  food  of  any  sort,  is  no  more  stable  in  use- 
value  than  is  any  other  article  the  use  of  which  is  not 
dependent  upon  fashion;  and  that  it  is  by  no  means 
stable  in  esteem -value,!  which  would  be  a  very  unfortu- 
nate circumstance,  were  it  so,  since  one  of  the  blessings 
of  material  progress,  enlarging  room  for  spiritual 
increase,  is  that  our  daily  bread  should  fall  in  esteem- 
value.  It  musl  ^e  noticed  that  wheat,  or  corn  in  gen- 
eral, was  thus  advanced  as  a  standard  of  value,  not 
because  of  itself,  but  because  it  was  supposed,  though 
mistakenly,  to  fulfil  certain  conditions.  We  shall  later 
find  it  advanced  in  the  same  way  for  an  entirely  dif- 
ferent condition  which  it  was  supposed,  likewise  mis- 
takenly, to  fulfil,  and  which  if  it  did  fulfil,  it  would  be 

*0p.  cit.  p.  362. 

fOp.  cit.  p.  304.  Cf.  also  pp.  370-1.  He  here  remarks  that  wages 
cannot  be  relied  on  where  they  are  interfered  with  by  political 
regulations. 

JStewart  himself  cast  it  aside  on  p.  388. 


389175 


38  HISTORICAL    SURVEY 

a  standard  of  still  another  kind  of  value,  namely  cost- 
value.  Then  it  becomes  difficult  to  see  on  what  ground 
precisely  the  advocates  of  the  corn  standard  maintain 
it,  since  they  generally  seem  to  mix  up  the  conditions 
for  which  it  was  originally  recommended,  or  at  least  do 
not  distinguish  between  them.*  Others,  however,  have 
upheld  it  because  of  the  inherent  virtue  in  corn  to  sup- 
port life  and  "maintain  labor. "t  And  by  statisticians 
the  price  of  wheat  has  sometimes  been  used  as  a  help  in 
estimating  the  value  of  money,  seemingly  its  exchange- 
value,  during  past  times,  only  because  of  lack  of  other 
data.t 

§3.  Even  before  the  starting  of  the  corn  standard 
upon  its  checkered  career,  attention  had  been  casually 
turned  to  land,  the  source  of  corn  and  of  most  of  the 

*The  idea  that  corn  is  a  standard  of  value  because  of  the  stability  of 
the  labor-cost  of  producing  it  was  suggested  by  Adam  Smith,  in  McCul- 
loch's  edition  already  referred  to,  p.  86a,  although  this  is  slightly  dif- 
ferent from  the  real  reason  which  led  him  to  recommend  it.  Two 
reasons  were  also  together  given,  as  we  shall  see,  by  J.  B.  Say.  After 
such  inauspicious  beginning  the  corn  standard  has  been  for  more  or  less 
inconsistent  reasons  recommended  by  F.  Horner,  Speech  of  May  6th  1811, 
Parliamentary  Debates,  N.  Series,  Vol.  X.  pp.  909-10;  H.  Storch,  Cours 
d'iconomie  politique,  Paris,  1823-4,  Vol.  II.  p.  155;  J.  G.  Graham,  Corn 
and  currency,  London,  182G,  pp.  26,  29;  L  Cibrario,  Delia  economia 
poUtica  del  medio  evo,  Turin,  1839  (ed.  of  1861,  Vol.  II.  pp.  145  ff . ) ;  W. 
Newmarch,  in  Supplement  to  the  Economist,  Feb.  20th  1864,  (grain  for 
long  periods,  the  multiple  standard  for  short  periods),  p.  4;  and  also,  as 
will  be  noticed  in  their  places,  by  G.  Gamier,  Chevalier,  Levasseur, 
Bowen,  Roscher,  Jevons,  and  F.  A.  Walker. 

tAdara  Smith  likewise  gave  origin  to  this  view  in  some  casual  pas- 
sages, pp.  229,  239,  which  differ  from  his  main  doctrine.  He  was  fol- 
lowed here  by  some  semi-socialist  writers,  e.  g.  John  Taylor,  Catechism 
of  the  currency,  London,  18.?6.  pp.  9.  12,  13,  105,  and  J.  Duncan,  The 
bank  charter  act,  London,  1857,  pp.  156,  193. -J.  S.  Mill  treated  this  as 
a  standard  of  use-value,  Principles  of  political  economy,  eighth  edition, 
Vol.  II.  p.  105. 

tOr  "faute  de  mieux,"  H.  Bordet,  L'or  et  Vargent,  Paris,  1864,  p.  27. 


EARLY  ECONOMISTS  39 

necessaries  of  life,  as  the  best  standard  of  value.  This 
was  done  in  1672  by  Pufendorf,  who  seems  to  have 
regarded  farm  land  as  always  of  the  same  value,  assert- 
ing that  "when  a  farm  is  now  worth  two  hundred, 
which  a  century  ago  was  worth  a  hundred,  properly 
not  the  value  of  the  farm,  but  of  money,  has  varied."* 
But  no  practical  use  was  sought  to  be  made  of  this 
idea  until  John  Law  recommended  land  as  the  best 
guaranty  for  paper  money,  for  the  reason  at  least 
that  he  thought  land  less  likely  to  depreciate  than  the 
precious  metals. t  Law  was  followed  for  this  practical 
purpose  by  Franklin, t  although,  as  we  shall  see, 
Franklin  had  another  standard  of  value  in  theory. 
The  rent  of  land  was  also  conceived  by  Cantillon  to 
be  the  best  means  of  determining  the  abundance  or 
rarity  of  money  in  circulation.il  The  price  of  land  has 
by  some  later  writers  been  mixed  in  with  the  prices  of 
other  things,**  and  even  with  wages. tt     Land  as  a  sole 


* Dejure  naturae  et  gentium,  V.  I,  15,  16. 

\ Money  and  trade  considered,  Edinburgh,  1705,  Chapter  VI. 

X  Modest  enquiry  into  the  nature  and  necessity  of  a  paper  currency, 
Philadelphia,  1729,  in  Spark's  ed.  Vol.  II.  pp.  268-70. 

II  Ussai  sur  le  commerce,  written  before  1734,  first  published  in  1755, 
Harvard  ed.  pp.  247-9. 

**  J^.  g.  J.  P.  Smith  would  ascertain  depreciation  of  money  "by' the 
increase  in  the  rate  of  prices  generally;  and  more  particularly  by  the 
increase  in  the  price  of  arable  and  pasture  land;  which,  as  it  is  the 
chief  source  of  production,  and  is  generally  of  a  steady  value,  is  the 
best  test  of  the  value  of  money,"  Elements  of  the  science  of  money, 
London,  1813,  p.  76. 

ttL.  A.  Garnett,  instead  of  using  the  prices  of  the  perishable  prod- 
ucts of  capital  and  labor,  would  prefer  to  measure  the  value  of  money 
by  the  prices  of  "all  the  more  stable  and  permanent  forms  of  material 
wealth,"  by  which  he  means  on  the  one  side  both  land  and  "capitalized 
labor,"  i.e.  all  the  leading  funded  securities,  and  on  the  other  "wage 
labor"  itself,  The  crux  of  the  money  controversy:  has  gold  risen f 
Forum,  Jan.  1895,  pp.  584-6. 


40  HISTORICAL    SURVEY 

standard  of  exchange -value  is,  of  course,  condemned  by 
the  fact  that  it  is  not  the  only  good  thing  we  possess; 
and  as  a  sole  standard  of  esteem -value,  by  the  fact  that 
it  varies  in  esteem -value  with  the  density  of  population 
and  the  power  of  deriving  utility  from  it.  And  as  a 
single  item  in  a  list  of  prices  intended  to  measure  varia- 
tions in  the  exchange -value  of  money,  it  is  open  to  the 
objection  that  it  varies  greatly  in  quality,  every  plot  of 
ground  being  affected  not  only  by  improvements  upon 
itself  but  by  improvements  in  its  neighborhood.  These 
reasons  explain  why  the  land  standard  has  had  so  few 
advocates. 

§4.  Most  of  the  early  wi'iters  we  have  so  far 
noticed  treated  the  subject  of  the  "value"  of  money  in 
a  very  casual  manner.  In  the  eighteenth  century, 
however,  there  were  many  writers  who  devoted  much 
attention  to  this  subject,  either  conducting  investiga- 
tions seeking  to  measure  the  fluctuations  which  had 
occurred  in  the  value  of  money  during  past  times,  espe- 
cially the  depreciation  since  the  discovery  of  America, 
or  trying  to  determine  how  monetary  contracts  should 
be  paid  in  the  same  value  at  the  solution  that  was 
expected  in  the  bargaining.  And  now  the  peculiarity 
is  found  that  the  "value"  had  in  mind  by  these 
numerous  eighteenth -century  writers  shows  itself,  by 
the  accounts  they  gave  of  it  and  by  the  methods  they 
used  or  recommended  to  measure  it,  to  have  been  ex- 
change-value. Perhaps  the  first  Avho  conducted  an 
investigation  to  estimate  what  sum  of  money  in  his 
own  day  had  the  same  value  as  a  given  sum  of  money 
at  an  earlier  date  was  Bishop  Fleetwood,  who  published 
his  Chronicon  Perciosum  in  1707,  *  Similar  attempts 
*See  especially,  in  the  2d  ed.,  1745,  pp.  8,  48-9,  135-8, 


EARLY  ECONOMISTS  41 

were  made  in  1738  by  Dutot,  incidentally,  in  his 
Reflexions  poUtiques  siir  les  Finances  et  le  Commerce 
(Vol.  I.  pp.  365-377),  in  174G  by  Dupre  de  Saiut- 
Manr  in  his  Essai  sur  les  Monnoies  on  Reflexions  sur  le 
Rapport  entre  V  Argent  et  les  Denrees,  in  1764  by  Carli 
in  a  little  work  Del  Valore  e  della  Proporzione  de' 
Met  alii  con  i  Generi  in  Italia  prima  delle  Scoperte  delV 
Indie  con  Gonjronto  del  Valore  e  della  Proporzione  de* 
Tempi  nostri,  and  finally  in  1798  by  Sir  George  Shuck- 
bnrgh  Evelyn  incidentally  in  his  Accoimt  of  some 
Endeavors  to  ascertain  a  Standard  of  Weight  and 
Measure  published  in  the  Philosophical  Transactions 
of  the  Royal  Society  of  London.  AU  these  writers 
sojight  to  measure  variations  in  the  "value"  of  money 
byjvariations  in  the  prices  of  several  kinds  of  commodi- 
ties. Only  two  of  them,  Dutot  and  Evelyn,  the  ones 
who  gave  least  attention  to  the  subject,  included  wages, 
and  only  subordinately,  Evelyn  giving  to  wages  about 
one -third  as  much  weight  as  to  commodities,  and  Dutot 
treating  wages  as  equally  important  with  the  least  im- 
portant commodity  in  lists  containing  from  four  to 
thirteen  commodities,  and  sometimes  omitting  wages 
altogether.  It  may  be  noticed  also  that  the  numisma- 
tist, Eckhel,  in  his  Doctrina  Numorum  Veterum,  1785, 
considered  the  best,  though  the  least  practicable,  way 
of  estimating  the  value  of  ancient  relatively  to  modern 
moneys  was  by  comparing  their  relations  "to  vendible 
things"  (Vol.  V.  p.  27).  The  principle  of  the  com- 
modity standard  was  also  enunciated,  but  with  some 
admixture  of  the  idea  of  esteem-value,  by  Solera,  who 
wrote  in  1785,  but  could  not  publish  his  work  till 
1798* 

*£ssai  8tir  les  valeurs,  ed.  Custodi,  pp.  292,  295. 


42  HISTORICAL    SURVEY 

The  question  of  contracts  was  discussed  principally 
by  the  Italian  economists.  These  were  almost  unani- 
mous in  holding  that  contracts  are  rightly  paid  in 
money  having  the  same  power  over  things.  Thus 
Galiani,  writing  in  1750,  ridiculed  those  who  thought 
it  unjust  to  pay  debts  in  money  altered  by  the  prince, 
and  who  instead  demanded  repayment  in  the  same 
quantity  of  metal,  saying:  "If  they  believed  that  with 
the  restitution  of  the  same  weight  of  metal  they  sustain 
always  that  equality  which  is  the  soul  of  contracts,  they 
deceive  themselves."  For,  he  continued,  "The  fact 
that  the  intrinsic  value  of  money  is  almost  as  variable 
as  its  extrinsic,  destroys  all  equality.  Thus  in  our 
kingdom  after  a  debt  had  been  contracted  a  hundred 
years  ago  for  a  hundred  pounds  of  silver,  if  to-day  a 
hundred  pounds  of  silver  is  restored,  the  equivalent  is 
not  rendered,  but  hardly  the  two -thirds  of  what  was 
agreed  upon,  because  to-day  silver  is  worth  certainly  a 
third  less  than  then,  or,  according  to  the  popular  ex- 
pression, commodities  have  grown  dearer  [i.e.  risen  in 
price]  by  a  third."*  And  similarly,  but  more  definitely, 
Becearia  objected  both  to  the  old  doctrine  that  contracts 
should  be  paid  in  the  same  denominations,  whatever  the 
intervening  alterations  of  the  moneys,  and  to  the  more 
recent  doctrine  that  they  should  be  paid  in  the  same 
quantity  of  metallic  contents  in  the  coins,  condemning 
the  former  as  "little  legitimate"  and  the  latter  as  "not 
seeming  entirely  to  satisfy  equity."  The  reason  he  gave 
for  the  last  was  that,  "If  with  an  ounce  of  silver  a 
century  ago  I  could  have  had  the  double  of  the  things 
which  I  can  now  have  with  the  same,  any  one  who 
then  loaned  me  that  ounce  of  silver  ceded  the  right  to 

•Delia  moneta,  ed.  Custodi,  Vol.  II.  pp.  259-60. 


EARLY   ECONOMISTS  43 

have  the  double  of  the  things  which  can  now  be  ob- 
tained. Now,  he  who  pays,  being  under  obligation  to 
put  the  creditor  in  his  pristine  right,  ought  to  return  to 
him  enough  silver  to  have  the  double  of  these  things; 
therefore  he  ought  to  return  not  one  ounce  of  silver, 
but  two,  so  as  to  give  right  to  double  the  things  obtain- 
able with  one  ounce.  "But,"  Beccaria  continues,  "the 
variety  and  the  want  of  entries  and  the  diverse  abun- 
dance of  things  render  difficult  the  exact  computation 
of  how  much  ought  justly  to  be  repaid.  lu  order  to 
approximate  to  the  truth,  it  seems  that  we  ought  to 
have  regard  to  the  quantity  of  metal  compared  with  the 
price  of  goods  of  first  necessity  at  the  time  of  the  loan, 
since  these  are  the  most  common,  the  best  known,  and 
the  least  variable  in  value  of  all  things."*  The  ending 
appears  to  be  a  limitation  of  the  multiple  standard  only 
for  convenience.  A  little  later,  in  1771,  Verri  touched 
upon  the  question,  but  despaired  of  being  able  to  meas- 
ure the  variations  in  the  value  of  money  by  means  of 
prices,  and  yet  regarded  the  principle  of  paying  debts 
in  money  with  the  same  value  so  measured  as  the 
nearest  approximation  to  rectitude. t  But  the  fullest 
attention  was  about  the  same  time  given  to  the  subject 
by  Vasco  in  his  essay  Delia  Moneta,  published  in  1772. 
Vasco  was  one  of  the  first  to  define  the  "value  of 
money"  as  "nothing  but  a  relation  of  money  to  the 
tiling  for  which  it  is  exchanged"  (p.  7  of  Custodi's 
ed.),  or  as  "all  that  people  usually  give  for  it"  (p.  8). 
He  maintained  that  the  "  true  or  real  value  "  of  a  coin 
(of  one  metal)  "results  from  its  relation  to  other  kinds 


*  Element i  di  economia  piihlica,  lectures  delivered  in  1769-70,  first 
published  in  1804  by  Custodi,  Vol.  II.  pp.  48-9. 

fMeditazioni  sulla  economia  politica ,  ed.  Custodi, Vol.  I.  pp.  146-149. 


44  HISTORICAL    SVBVEY 

of  money  or  to  commodities"  (p.  17  n.),  and  that  when 
the  money  metals  have  varied  relatively  to  one  another 
the  proper  way  to  find  which  has  varied  in  value,  and 
which  not,  is  to  find  their  relations,  or  to  confront 
thera,  with  the  universality  of  commodities  (pp.  11, 
130-1).*  He  now  likewise  recognized  that  not  only  a 
debt  repaid  after  a  hundred  years  in  the  same  denomi- 
national sum,  but  a  debt  then  paid  in  the  same  quantity 
of  metal,  would  not  return  an  equivalent,  since  a  given 
number  of  unaltered  coins  "represents  at  present  con- 
siderably smaller  quantities  of  commodities  than  it  did 
a  hundred  years  ago"  (p.  151).  And  if  he  admitted  the 
principle  of  making  contracts  payable  in  coins  of  a  fixed 
weight  of  metal  (preferring  copper  for  the  standard), 
it  was  only  because  of  the  difficulty,  and  the  likelihood 
of  error,  in  the  measurement  of  value,  and  because 
this  system  did  away  with  at  least  one  of  the  causes  of 
variation  in  the  value  of  money  (pp.  131-2,  152 ).t 


*  He  was  also  among  the  first  to  express  the  idea  contained  in  the 
following  words:  "The  relation  between  money  and  commodities  being 
able  to  vary  either  because  of  a  change  happening  to  the  commodities 
or  because  of  a  change  occurring  in  money,  in  the  first  case  it  is  properly 
said  that  the  value  of  the  commodities  has  changed  and  in  the  second 
the  value  of  money,"  p.  10.  But  here  he  made  no  reference  to  labor  or 
any  other  standard,  and  the  context  shows  that  he  did  not  conceive  of 
all  commodities  as  changing  in  value,  but  only  of  one  or  a  few  specimens. 

tThe  Scottish  economist  Sir  James  Steuart  had  a  similar  conception 
about  the  propriety  of  paying  contracts  in  the  same  value  rather  than  in 
the  same  metal,  cf.  his  Ivqiiiry  into  the  principles  of  political  economy, 
London,  17G7,  Vol.  I.  p.  5.39.  But  his  ideas  about  the  nature  of  value  were 
hopelessly  confused  (as  partially  admitted  by  himself.  Vol.  II.  p.  56). 
He  thought  he  found  a  stable  standard  in  Banco  money,  or,  at  times,  in 
a  mere  system  of  denominations,  Vol.  I.  pp.  5r?l,  532.  cf.  also  his  Piinci- 
ples  of  money  applied  to  the  prexenf  state  of  the  coin  of  Bengal,  2d  ed. 
1772.  pp.  11,  17,  though  he  ultimately  recommended  that  this  should  be 
firmly  attached  to  a  fixed  quantity  of  bullion.  In  all  but  the  last  respect 
be  has  been  succeeded,  to  mention  the  most  respectable,  by  Tb.  Smith, 


EARLY    ECONOMISTS  45 

§  5.  Labor  as  a  standard  of  value  through  the  course 
of  time  seems  to  have  been  first  suggested  by  Franklin 
in  1729.  But  Franklin  conceived  of  this  standard  very 
indefinitely,  confounding  two  distinct  ways  of  using  it, 
which  later,  as  we  shall  see,  became  the  subjects  of  con- 
tention between  two  branches  of  the  British  school  of 
political  economy.  For  in  some  passages  Franklin  con- 
ceived the  standard  to  be  the  labor-cost  of  producing 
the  material  used  as  money  {Op.  cit.  pp.  265,  270),  and 
elsewhere  he  conceived  it  to  be  the  inverse  of  the 
quantity  of  labor  money  will  purchase,  that  is,  the  in- 
verse of  wages  (pp.  265-6,  268).*  The  standard  of 
wages  alone  was  again  made  use  of  by  Harris,  who  pub- 
lished his  Essay  upon  Money  and  Coins,  in  two  Parts,  in 
1757  and  1758.  Harris  wrote:  "The  wages  of  the  lower 
classes,  wherein  is  to  be  included,  as  well  the  common 
artificer  as  the  husbandmen,  seems  to  be  the  main  and 
ultimate  standard  that  regulates  the  values  of  all  com- 
modities" (Part  I.  p.  13,  cf.  p.  9).  But  Harris  was  in- 
fluenced by  other  than  scientific  interest  in  advocating 
this  standard.  He  wanted  to  prove  that  silver  was  still 
the  monetary  standard  in  England  in  spite  of  its  disuse 
in  large  transactions,  and  he  sought  to  prove  this  by 
arguing  that  as  wages  were  the  standard  of  value  and  as 
wages  were  paid  in  silver,  therefore  silver  was  the 
standard  (ib.,  also  Part  II.  p.  94),  He  was,  of  course, 
mixing  up  two  meanings  of  the  word  "standard." 

Essay  oti  the  theory  of  money  and  exchange,  London,  1808,  2d  ed.  1811, 
by  W.  Lipke,  Notion  de  la  monnaie,  Journal  des  Economistes,  15  sept. 
1853,  and  by  a  couple  of  recent  writers  who  will  be  noticed  later. 

*Upon  these  matters  he  was  less  precise  in  his  letter  of  Feb.  21st 
1769  to  Lord  Karnes;  but  there  he  was  more  specific  in  re-connecting  the 
measure  of  value  with  the  food  standard  by  confining  the  standard  labor 
to  agricultural  labor,  Vol.  VIL  p.  435. 


46  HISTORICAL   SURVEY 

§6.  In  this  cursory  history  of  the  opinions  of  the 
early  economists,  it  may  be  noticed  that  the  idea  of  ex- 
change-value predominates.  A  few  writers  were  insen- 
sibly led  from  the  commodity  standard,  curtailed  to  food 
stuffs,  to  what  seems  rather  to  be  the  idea  of  esteem - 
value,  while  only  two  regarded  labor  as  the  standard 
and  so  conceived  either  of  esteem -value  or  of  cost -value, 
notwithstanding  that  some  others,  such  as  Petty  and 
Cantillon,  held  the  cost -of -production  theory  of  relative 
values.  We  now  come  to  that  writer  who,  himself  the 
principal  introducer  of  the  term  "exchangeable  value," 
was  the  first  to  consider  seriously  the  important  or 
"real"  feature  in  the  value  of  money  to  be  another  kind 
of  value,  for  which  he  had  no  name,  and  thereby  became 
the  father  of  confusion  in  modern  political  economy. 


CHAPTER  II 

ADAM    SMITH    AND    RICARDO 

§1.  Adam  Smith,  after  disentangling  "exchange- 
able value"  from  "value  in  use,"  distinguished  within 
the  former  between  nominal  and  real  exchangeable 
value,  or,  leaving  off  the  specific  epithet,  between 
nominal  and  real  value.  By  "nominal  value"  he  meant 
only  exchange -value  in  money  (p.  157  b,  cf.  p.  15), 
and  had  no  term  for  general  exchange -value,  in  distinc- 
tion from  such  a  particular  exchange -value.  He  there- 
fore dismissed  this  kind  of  value,  and  with  it  the  whole 
of  exchange -value  proper,  and  confined  his  attention 
to  what  he  called  "real  value,"  or,  by  still  omitting  the 
epithet,  simply  "value,"  which  soon  became  something 


ADAM   SMITH   AND   BICABDO  47 

else  than  exchange -value,  although  it  confusedly  re- 
tained some  of  the  elements  of  exchange-value.  Adam 
Smith  now  conceived  of  labor  not  only  as  the  measure 
of  value  at  a  given  time  aud  place,  but  as  the  staudard 
of  value  at  all  times  and  places  (p.  16  b).  He  was 
influenced  to  this  by  two  distinct  reasons.  The  one  is 
that  every  man  is  rich  or  poor  according  to  his  com- 
mand over  "the  necessaries,  conveniences,  and  amuse- 
ments of  human  life,"  and  that,  as  no  one  procures  all 
these  things  by  his  own  exertions  alone,  he  can  have 
command  over  these  things  only  in  proportion  as  he 
has  command  [which,  apart  from  his  own  labor,  can 
be  given  him  only  by  his  already  accumulated  posses- 
sions in  land  and  commodities]  over  the  labor  of  other 
persons,  so  that  the  value  to  him  of  anything  he 
possesses  is  represented  by  the  labor  it  will  enable  him 
to  command  (p.  13b).  The  reasoning  here  is  defec- 
tive, because  labor  is  used  merely  as  an  intermediary 
between  the  wealth  a  man  possesses  and  the  wealth  he 
consumes,  aud  by  similar  reasoning  the  measure  and 
standard  of  value  could  be  shown  to  be  money  or  any- 
thing else.  The  other  reason  is  that  "equal  quantities 
of  jabor,  at  all  times  and  places,  may  be  said  to  be  of 
equal  value  to  the  laborer"  (p.  15a).  With  this  state- 
ment the  trouble  is  the  impossibility  of  putting  any 
meaning  into  the  word  "value"  as  here  used.  Certainly 
none  of  the  economic  senses  of  the  term  is  applicable, 
and  especially  not  any  sense  that  can  be  ascribed  to  the 
term  "exchangeable  value."*   A  better  position  is  taken 


*  If  he  had  said  the  whole  quantity  of  the  goods  purchasable  with  a 
given  amount  of  labor  is  always  of  the  same  value  to  the  laborer,  he 
would  have  used  the  word  "value"  with  a  possible  meaning;  for  this 
assertion  has  meaning  when  we  interpret  "value"  as  esteem- value.     In 


48  HISTORICAL    SURVEY 

when  he  says  that  "the  real  price  of  everything,  what 
the  thing  really  costs  to  the  man  who  wants  to  acquire 
it,  is  the  toil  and  trouble  of  acquiring  it"  (p.  13b), 
and  that  to  mankind  in  general  labor  is  the  "first"  or 
"ultimate  price"  that  we  pay  for  all  things  (pp.  14n, 
87  a),  although  the  expression  here  is  faulty  in  that  the 
term  "cost"  would  be  better  than  the  term  "price."  We 
must,  however,  be  careful  to  notice  how  Adam  Smith 
uses  this  term  "price"  and  the  term  "value";  for  he 
makes  a  clean-cut  distinction  between  them.  The 
j" price"  of  an  article,  in  his  phraseology,  is  what  we 
i  give  up,  or  what  it  costs  us,  in  order  to  get  the 
{article;  but  the  "value"  of  the  article  is  what  we  can 
'get  by  giving  it  up  or  exchanging  it  away.  Now  in  a 
primitive  society  Adam  Smith  conceived  that  commodi- 
ties would  exchange  in  proportion  to  the  amounts  of 
labor  it  took  to  produce  them  (pp.  21-22).  Hence,  in 
such  society  their  price  and  their  value  would  coincide. 
But  in  the  advanced  stages  of  civilization  in  which  we 
live  he  recognized  that  commodities  do  not  exchange  in 
proportion  to  the  labor  required  to  produce  them,  that 
is,  in  proportion  to  their  labor-costs.  Hence,  in  our 
world,  the  price  and  the  value  of  commodities  in  labor 
no  longer  coinciding,  the  measure  of  price  and  the 
measure  of  value  are  different.  Thus  Adam  Smith  tells 
us  the  "real  price"  of  a  commodity  is  the  quantity 
of    labor    required    to    produce    it    (pp.    13  b,    87  a, 


this  form  we  shall  find  the  statement  made  by  Malthus  and  ■with  a 
variation  by  McCulloch.  It  was  doubtless  what  Adam  Smith  really 
meant  ;  for  a  few  lines  further  on  he  says  ;  as  the  same  labor  "may 
sometimes  purchase  a  greater  and  sometimes  a  smaller  quantity,"  of 
goods,  "it  is  their  value  which  varies,  not  that  of  the  labor  which 
purchases  tliem,"  meaning  the  value  of  the  individual  goods,  not  the 
value  of  the  whole. 


ADAM   SMITH   AND   BICABDO  49 

cf.  14a),  but  the  "real  value"  of  a  commodity, 
and  of  money,  is  the  quantity  of  labor  it  will  pur- 
chase (pp.  13b,  14a,  b,  97  b,  157  b).  From  the  other 
siJ^to  him,  the  "real  price"  of  labor  is  "the  quantity 
of  the  necessaries  and  conveniences  of  life,  which  are 
given  for  it"  (p.  15a),  while  the  "real  value"  of  labor 
is  labor  itself,  always  the  same,  as  already  noticed.* 
The  measure  of  real  price  did  not  occupy  Adam  Smith's 
attention  ;  but  he  busied  himself  much  with  the 
measure  of  real  value,  or  with  the  real  measure  of 
value.  In  the  case  of  money,  its  "real  value"  would 
be  according  to  the  quantity  of  labor  it  will  command, 
or,  in  his  phrase,  purchase,  thus  being  according  to  its 
purchasing  power  over  labor,  or  according  ^to  its  ex- 
change-value  in  labor.  It  would  thus  be  the  inverse^ 
of  the  nominal  or  money  "price  of  labor,"  or  wages. 
And  if  Adam  Smith  did  not,  in  his  attempts  to  measure 
variations  in  the  value  of  money,  so  make  use  of  wages, 
but  in  their  place  substituted  the  price  of  corn,  it  was 
only  because  of  the  practical  difficulty  of  his  not  being 
able  to  obtain  tables  of  wages,  whereas  he  was  able  to 
obtain  tables  of  the  prices  of  corn,  and  he  thought  the 
variations  of  the  prices  of  corn  most  likely  to  approxi- 
mate to  variations  in  the  prices  of  labor  (pp.  16a, 
17a-b),  thus  inverting  the  procedure  of  Rice  Vaughan 
(to  which,  as  we  have  seen,  Dugald  Stewart  later 
reverted) .  t      Thus   wages   were    Adam    Smith's    real 


♦There   is   an   obvious   defect   in   this  contrast;    for  the  quantity  ^ 
of  necessaries,  etc.,  given   to  the  laborer  for  his   labor  is  the  same  as  j 
the  quantity  of  necessaries,  etc.,  which  his  labor  purchases,  and  there- 
fore that  quantity  could  equally  well  be  regarded  as  the  "value"  of  his 
labor,  which  would  then  fluctuate  with  that  quantity. 

t  Further  on  in  his  work  Adam  Smith  gave  another  wholly  different 
reason  for  considering  corn  the  standard  of  value.     This  is  the  opinion 

D 


50  HISTORICAL    SUEVEY 

measure  of  the  value,  or  "exchangeable  value,"  of 
money. 

Now,  if  Adam  Smith  had  confined  himself  to  saying 
that  the  rate  of  wages  is  the  measure  of  the  "  value  "  of 
money,  so  that  for  the  "value"  of  money  to  remain  con- 
stant, the  rate  of  wages  should  remain  constant,  he 
would  have  approached  near  to  a  true  statement.  He 
would  not  have  reached  a  completely  true  statement, 
because  wages  are  not  the  only  earnings  which  men 
make  by  their  labor.  Instead  of  "wages,"  then,  he 
should  have  said  that  "earnings"  (meaning  of  course 
money-earnings)  are  the  measure  of  the  "value"  of 
money.  But,  so  put,  the  statement  would  be  vague, 
because  of  the  vagueness  of  the  term  "value."  Yet  the 
very  vagueness  of  the  term  "value"  would  now  call  for 
definition,  and  it  could  easily  be  seen  that  such  a  stand- 
ard is  not  the  measure  of  the  exchange-value  of  money, 
but  of  its  esteem -value;  for  the  more  money  people  in 
general  earn,  the  less  they  esteem  it,  and  conversely; 
and  if  the  rate  of  earnings  remains  constant,  constant 

already  referred  to  about  the  same  quantity  of  corn  always  "maintain- 
ing" the  same  amount  of  labor,  pp.  '229a,  239a.  The  reasoning  seems  to 
be  that  as  corn  maintains  labor,  and  as  the  quantity  of  labor  a  thing 
will  purchase  is  the  measure  of  its  real  value,  therefore,  ultimately,  the 
quantity  of  corn  a  thing  will  purchase  is  the  measure  of  its  real  value. 
Agreement  between  this  corn  standard  and  the  labor  standard  would  last 
only  so  long  as  laborers  are  kept  on  a  fixed  (a  minimum)  diet;  which 
was  not  believed  by  Adam  Smith  to  be  a  permanent  condition.  In  an- 
other passage,  p.  86a,  as  also  previously  noticed,  Adam  Smith  recom- 
mended the  corn  standard  because  of  the  uniformity  through  time  in  the 
cost  of  production  of  corn,  which  is  still  another  entirely  different  rea- 
son. The  first  of  these  is  perhaps  onlj'  an  underlying  reason  for  his 
opinion  that  the  price  of  corn  agrees  in  its  variations  over  long  periods 
with  the  price  of  labor,  or  wages;  cf.  pp.  16a,  86b.  The  last  is  only  an 
accidental  slip  from  his  real  position,  like  his  slip  in  once  using  the  cost- 
of-production  theory  to  explain  relative  values,  p.  145a  (cf.  p.  14b), 
which  is  quoted  with  pleasure  by  Ricardo,   Works,  p.  186. 


ADAM  SMITH   AND   RICARDO  51 

would  seem  to  be  the  esteem -value  of  money.  Adam 
Smith,  however,  was  inventing  a  new  confusion  when 
he  applied  this  measure  to  the  "exchangeable  value" 
of  money.  The  phrase,  the  "exchangeable  value  of 
money,"  which  he  defiued  as  its  "purchasing  power" 
(p.  13  a),  must  inevitably  bear  with  it  reference  also 
to  commodities.  And  so  we  find  Adam  Smith  not 
only  using  the  quantity  of  labor  purchasable  with 
money  as  the  measure  of  the  exchangeable  value  of 
money,  but  also  "the  quantity  of  labor  and  commodi- 
ties" (p.  101a),  or  even  "the  quantity  of  labor  which 
any  particular  quantity  of  them  [gold  and  silver]  can 
purchase  or  command,  or  the  quantity  of  other  goods 
which  it  will  exchange  for"  (p.  115a).*  Here  is  ob- 
vious inconsistency.  Three  distinct  positions  are  held. 
One  is  that  the  value  of  money  is  measured  by  the  labor 
alone  which,  as  is  said,  the  money  can  purchase.  An- 
other is  that  it  is  measured  by  the  labor  and  the  com- 
modities which  the  money  purchases  —  by  a  combination 
of  both,  so  that  it  might  be  constant  if  the  money  pur- 
chased more  labor  and  less  commodities,  or  reversely. 
And  still  another  is  that  it  is  measured  indifferently 
either  by  the  labor  or  by  the  commodities  which  the 
money  purchases.  This  last  position  would,  indeed, 
harmonize  the  former  two,  if  it  were  true  that  it  is 
indifferent  whether  we  measure  the  value  of  money  by 
labor  or  by  commodities,  that  is,  if  it  were  true  that 
these  two  methods  of  measuring  the  value  of  money 
must  always  give  the  same  result  (the  cases  above  sup- 
posed not  being  able  to  occur).     This  position  Adam 

♦Compare  also  his  definition  of  "real  wealth"  as  the  "power  of  pur- 
chasing the  labor,  or  the  produce  of  the  labor  of  other  people,"  on  p.  115a, 
with  his  original  definition  of  wealth. 


52  HISTORICAL    SURVEY 

Smith  once  assumes,  when  he  says  that  a  man's  for- 
tune is  precisely  in  proportion  to  "the  quantity  either 
of  other  men's  labor,  or  what  is  the  same  thing,  of 
the  produce  of  other  men's  labor,  which  it  enables  him 
to  purchase  or  command"  (p.  14a).  Bat  this  is  not 
only  not  true,  but  it  is  not  even  his  own  doctrine,  be- 
cause his  own  doctrine  was  that  this  would  be  true 
only  in  a  primitive  society  and  that  it  is  not  true  in 
our  age.  Moreover  he  himself  recognized  that  at  dif- 
ferent periods  the  productiveness  of  labor  is  different, 
so  that  a  money  which  at  different  periods  will  com- 
mand the  same  quantity  of  labor  will  not  command 
the  same  quantity  of  the  produce  of  labor,  and  con- 
versely (pp.  16  a,  37  a);  and  it  is  precisely  between 
these  two  variables  that  he  chose  for  his  standard  the 
purchasable  quantity  of  labor  instead  of  the  purchas- 
able quantity  of  commodities.  He  chose  the  standard 
of  producing  power  measured  by  time,  instead  of  the 
standard  of  producing  power  measured  by  efficiency. 
Hence  he  ought  to  have  abided  by  the  one  of  these 
standards  and  to  have  totally  rejected  the  other.  His 
inability  to  do  so  was  due  to  his  choosing  as  the  stand- 
ard of  "exchangeable  value"  the  standard  which  was 
not  the  proper  one  for  exchange-value,  whereupon  the 
standard  rejected,  which  is  the  proper  one  for  ex- 
change-value, inevitably  forced  itself  upon  him  and 
mixed  itself  with  the  other.  Adam  Smith's  position, 
therefore,  needs  correction.  The  standard  which  he  set 
up  for  "exchangeable  value"  is  "really  the  standard  of 
esteem -value.  And  the  true  standard  for  exchange- 
value  proper  he  rejected,  though  he  also  admitted  it  into 
illegitimate  partnership  with  the  other  standard.  If  he 
wanted  the  "value"  of  money  to  remain  constant  ac- 


ADAM   SMITH  AND  BICARDO  53 

cording  to  the  standard  which  he  chose,  he  really 
■wanted  constancy  of  its  esteem -value.  But  his  words 
imply  that  he  wanted  constancy  of  its  exchange-value. 
In  wanting  both  these  things  together,  he  wanted  the 
impossible.  Which  of  these  he  would  have  selected, 
had  he  recognized  their  incompatibility,  we  cannot  tell. 
We  must,  however,  regard  him  as  inclining  rather  to 
the  wages  standard,  and  to  the  view  that  what  ought  to 
be  constant  in  money  is  its  esteem -value. 

§2.  Ricardo,  as  is  well  known,  applied  to  all  times 
the  doctrine  which  Adam  Smith  confined  to  primitive 
times.  Ricardo  revived  the  doctrine  that  even  in  the 
advanced  stage  of  society  in  which  we  live  the  "relative 
values"  of  commodities  are  determined  by  the  quantities 
of  labor  needed  to  produce  them,  modified  by  adding 
that  the  quantities  of  labor  referred  to  are  those  which 
are  needed  at  the  least  fertile  or  least  favorably  situated 
sources  of  production  that  are  actually  worked.  As  a 
doctrine  explaining  why  at  any  one  time  and  place  cer- 
tain commodities  have  certain  values  relatively  to  one 
another,  we  are  not  here  concerned  whether  it  is  true  or 
false.  Confined  to  this  purpose,  the  doctrine  has  been 
most  successfully  riddled.  But  we  may  even  allow  it 
bypothetically  to  be  true,  and  what  concerns  us  is  the 
conclusion  which  Ricardo  drew  from  it,  and  the  conclu- 
sion which  ought  to  be  drawn  from  it,  concerning  the 
standard  of  value  through  the  course  of  time.  Ricardo 
drew  the  conclusion  that  "that  commodity  is  alone  in- 
variable which  at  all  times  requires  the  same  sacrifice  of 
toil  and  labor  to  produce  it"  (p.  166).*  This  is  only  a 
summary  statement,  certain  modifications  being  needed 
not  only  about  the  poorest  sources  worked,  but  about 

♦References  are  to  McCulloch's  edition  of  Ricardo's  Works. 


54  HISTORICAL   SURVEY 

the  relative  amounts  of  capital,  or  past  labor,  and  of 
present  labor  employed.*  But,  modified  or  unmodified, 
this  is  not  the  proper  conclusion  to  be  derived  from  the 
original  doctrine  itself,  if  by  "value"  Ricardo  still  meant 
"relative  value"  or  "value  in  exchange."  The  conclu- 
sion really  passes  to  something  else,  namely,  to  cost- 
value.  For  it  is  obvious — and  the  original  doctrine 
about  the  relative  values  of  commodities  is  not  needed 
to  found  this  on  —  that  that  commodity  which  is  always 
produced  at  the  same  expenditure  of  labor,  which  al- 
ways costs  the  same  labor  (past  and  present  being 
somehow  harmonized),  is  constant  in  cost-value.  But 
such  a  commodity  need  not  always  be  of  the  same  "ex- 
changeable value,"  even  in  Adam  Smith's  sense  of  ex- 
change-value in  labor,  or  purchasing  power  over  labor, 
or  in  what  we  have  seen  to  merit  being  considered  to  be 
esteem -value;  which  is  precisely  why  Ricardo  rejected 
Adam  Smith's  doctrine.  Much  less  need  such  a  com- 
modity be  always  of  the  same  "exchangeable  value"  in 
the  proper  sense  of  this  term,  as  purchasing  power  over 
other  commodities;  which  is  also  admitted  by  Ricardo 
himself.  The  first  of  these  statements  is  true  if  the 
sources  of  the  production  of  the  article  be  more  or  less 
monopolized,  so  that  some  of  its  exchange -value  accrues 
to  the  owners  even  of  its  poorest  sources  as  rent  ad- 
ditional to  the  profit  which  is  the  ordinary  reward  of 
their  labor.  And  the  second  is  true  if  all  other  com- 
modities, or  the  majority  of  them,  be  improving  in  the 
costs  of  their  production,  so  that  their  cost -values  are 
falling;  for  then  their  "relative  values"  compared  with 
the  "relative  value"  of  this  unimproved  article  will  fall, 
and  its  "relative  value"  compared  with  theirs  will  rise. 

•These  are  added  on  pp.  28-9  and  46. 


ABAM  SMITH   AND    RICARBO  55 

So,  when  the  cost -values  of  all  commodities  are  falling, 
it  is  obvious  that  gold  or  silver,  or  money  in  general, 
would  retain  the  same  "relative  value"  compared  with 
them,  only  if  its  cost -value  fell  in  the  same  average  pro- 
portion. In  one  passage  Ricardo  makes  this  very  sup- 
position, but  all  that  he  thence  concludes  is  that,  when 
such  a  univei'sal  fall  in  cost-values  has  taken  place,  the 
articles  "will  all  regain  their  former  proportions  "  (pp. 
167-8).  It  is  plain  that  these  "former  proportions"  are 
the  former  "relative  values,"  or  exchange -values,  of 
all  the  commodities,  including  gold  and  silver.  But 
Ricardo  here  omits  this  obvious  statement,  and  main- 
tains simply  that  all  these  things  have  fallen  in  "value." 
And  if  one  thing  retains  its  cost -value  unchanged  while 
the  cost -values  of  all  the  rest  fall  to  half  what  they  were 
before,  he  says  simply  that  the  one  "has  retained  its 
former  value"  and  the  rest  have  "fallen  to  half  their 
former  value"  (p.  169).  And  so  he  concludes  simply 
that  "the  value  of  a  commodity"  cannot  be  estimated 
"by  the  abundance  of  other  commodities  for  which  it 
will  exchange"  (p.  171).  His  conception  is  that  a  com- 
modity may  remain  stable  in  "value"  by  remaining 
stable  in  cost -value  even  though  it  may  come  to  pur- 
chase more  of  all  other  commodities  than  it  did  before, 
because  all  these  commodities  have  fallen  in  "value" 
(since  they  must  have  fallen  in  cost-value  to  permit  of 
such  changes  in  their  "relative  value"  compared  with 
the  one  in  question),  so  that  it  does  not,  so  to  speak, 
purchase  more  "value"  than  it  did  before. 

Now,  Ricardo  admitted  Adam  Smith's  first  division 
of  value  into  value  in  use  and  value  in  exchange;  and 
also  at  times  made  use  of  his  second  division  into  nomi- 
nal  and  real  value.     And   it  is  evident,  in  Ricardo 's 


56  HISTORICAL    SURVEY 

case,  as  in  Adam  Smith's,  that  this  second  division  is  a 
subdivision  of  one  of  the  terms  in  the  first  division. 
For,  after  making  the  first  division,  Ricardo  turned  all 
his  attention  to  "exchangeable  value,"  and  omitted  the 
specific  epithet  because  of  its  superflnousness  on  account 
of  his  treating  only  of  this  one  kind  of  value.  But 
occasionally  he  did  add  the  epithet  "exchangeable,"  when 
he  happened  to  be  contrasting  this  value  with  value  in 
use,  and  then  he  treated  it  exactly  as  he  treated  his 
"real  value."*  These  sub-classes,  however,  he  used  in 
different  senses  from  Adam  Smith's.  By  "nominal 
value "  he  meant  value  "either  in  coats,  hats,  money, 
or  corn"  (p.  32),  i.  e.  in  commodities  named,  which  is 
particular  exchange -value;  and  we  shall  presently  see 
allusions,  elsewhere  made,  to  Avhat  is  general  exchange- 
value,  or  value  in  all  commodities  (not  named,  how- 
ever, but  understood),  which  is  exchange- value  proper. 
And  by  "real  value"  he  meant,  not  Adam  Smith's 
value  in,  or  purchasing  power  over,  labor,  which  we 
have  viewed  as  esteem -value,  but  value  identified  with 
"the  quantity  of  labor  and  capital,"  itself  in  his  opinion 
a  product  of  labor,  "employed  in  producing"  the  thing, 
which  is  cost- value.  And  now  again,  still  like  Adam 
Smith,  as  he  was  devoting  his  attention  principally  to 
this  "real  value,"  he  also  omitted  this  epithet,  and  gen- 
erally spoke  simply  of  "value,"  meaning  "real  value," 
or  what  if  written  out  in  full  would  be  "real  exchange- 
able value."  It  is  apparent  that  in  all  the  preceding 
exposition  of  his  views,  although  speaking  only  of 
"value,"  he  was  confining  his  attention  to  "real  value." 
Yet   in   other   passages,   while    still    speaking   only   of 


*As  on  p.  172.    Also  on  p.  377,  which  occurs  in  an  early  tract  in 
which  he  frequently  used  the  full  phrase. 


ADAM  SMITE    AND   RICARDO  57 

"value,"  lie  evidently  had  in  mind,  not  his  "real  value," 
or  cost -value,  but  exchange -value  proper,  or  his  "nomi- 
nal value"  in  an  extensive  sense,  or  the  "relative  value" 
of  one  commodity  compared  with  others  in  general. 
Thus,  while  following  Adam  Smith  in  defining  "ex- 
changeable value"  as  purchasing  power  (pp.  9,  49), 
leaving  off  the  epithet,  in  the  heading  of  the  very  first 
section  in  the  first  chapter  of  his  Principles  of  Political 
Economy  he  speaks  of  "the  value  of  a  commodity"  as 
"the  quantity  of  any  other  commodity  for  which  it  will 
exchange."  Similarly^lie  twice  identifies  a  rise  of  prices 
with  a  fall  of  the  "value"  of  gold  (pp.  214,  377).  He 
likewise  definitely  declares:  "The  only  proof  which  we  i 
can  possess  of  the  relative  cheapness  of  money  in  two 
places,  is  by  comparing  it  with  commodities.  Com- 
modities measure  the  value  of  money  in  the  same 
manner  as  money  measures  the  value  of  commodities. 
If,  then,  commodities  will  purchase  more  money  in 
England  than  in  France,  we  may  justly  say  that  money 
is  cheaper  in  England"  (p.  293).  And  even  more 
formally  he  asserts:  "The  value  of  a  commodity  is 
estimated  by  the  quantity  of  other  things  generally  for 
which  it  will  exchange"  (p.  401).  Still,  through  in- 
sufficient terminology,  he  cannot  see  that  while  the 
former  doctrine  is  tenable  of  cost -value,  or  his  own 
"real  value,"  the  latter  alone  is  true  of  exchange -value, 
and  only  of  exchange-value,  and  that  the  two  are  not 
incompatible,  as  each  holds  good  of  a  different  kind  of 
value.  For  in  the  text  surrounding  the  last  quotation 
he  actually  rejects  the  standard  of  "the  mass  of  com- 
modities" whereby  to  judge  of  the  "value"  of  money, 
on  the  ground  that  each  commodity  may  be  varying  in 
"value"  because  of   altered   costs   of   production    (pp. 


58  HISTORICAL    SURVEY 

400-401,  cf.  also  p.  470).  To  him  all  commodities 
together  can  rise  or  fall  in  "value,"  and  cannot  be  the 
standard  of  "value"  any  better  than  a  single  commodity 
(p.  166).  We  of  course  know  that  all  commodities  can 
(rise  or  fall  together  in  cost -value  and  in  esteem -value, 
■  wherefore  all  commodities  together  must  be  rejected  as 
a  standard  of  cost -value  or  of  esteem -value.  But  we 
also  know,  what  Ricardo  does  not  appear  to  have  seen,* 
that  all  commodities  together  cannot  rise  or  fall  in 
exchange -value;  wherefore  they  constitute  a  perfect 
standard  of  exchange -value. 

Thus,  just  as  Adam  Smith  was  confused  between  ex- 
change-value and  esteem-value,  Ricardo  was  confused 
between  exchange-value  and  cost-value. t  Ricardo  ad- 
vocated a  certain  doctrine  explanatory  of  the  "relative 
values,"  or  exchange- values,  of  commodities  at  any  given 
time  and  place,  where  the  commodities  are  exchanged 
for  one  another.  Because  this  doctrine  explains  such 
"relative  values,"  or  exchange -values,  by  relative  cost- 
values  (cf.  p.  186),  he  thence  passed  to  the  conception 
that  through  the  course  of  time  the  constant  "exchange- 
able value"  would  be  a  constant  cost -value.  He  trans- 
formed labor -cost  of  production  from  a  determinant  of 
the  relative  values  of  exchanged  things  into  a  determi- 
nant of  their  absolute  value,  so  to  speak,  without  refer- 
ence to  exchanges,  saying  "Labor  is  a  common  measure 
by  which  their  real  as  well  as  their  relative  value  may 
be  estimated"  (p.  171).  He  did  not  see  that  in  this 
transition  he  dropped  the  correlativity  essential  in  the 

*0r  else  he  would  not  have  written  as  he  did  on  p.  377  and  p.  378  n. 

+It  is  amusing  to  see  Ricardo  criticize  Adam  Smith  for  not  adhering 
to  his  definition  of  "value"  as  purchasing  power  over  commodities  (p. 
14),  when  he  himself,  though  adopting  the  same  definition,  did  not  ad- 
here to  it. 


ADAM  SMITH   AND   BICARDO  59 

conception  of  exchange -value,  and  relied  merely  on  the 
relativity  (to  labor)  which  is  to  be  found  only  in  the 
conception  of  cost -value  (and  perhaps  of  esteem -value). 
He  did  not  see  that  while  his  own  doctrine  called  for 
maintaining  the  labor-cost  of  production  to  be  the 
measure  or  standard  of  "real  value  "  in  his  own  sense  of 
this  term  as  cost-value,  through  the  course  of  time,  and 
while  it,  rightly  or  wrongly,  maintained  such  labor- 
costs  to  be  the  determinants  of  "relative  values,"  or 
particular  exchange -values,  at  any  time  and  place,  his 
own  doctrine  did  not  call  for  the  labor -cost  of  produc- 
tion of  a  given  thing  to  be  the  determinant  and  the 
measure  or  standard  of  its  exchange -value  in  the  only 
sense  in  which  the  term  "real  exchangeable  value"  has 
meaning,  viz.  general  exchange- value,  through  the 
course  of  time,  for  which  conception  the  only  measure 
and  standard  is  an  average  of  "the  mass  of  commodi- 
ties" without  regard  to  their  varying  costs  of  produc- 
tion, since  these  directly  affect  only  their  cost -values. 
Not  seeing  this,  he  simply  took  constancy,  not  of  ex- 
change-value, but  of  cost-value,  to  be  constancy  of 
"value,"  although  pretending  always  to  be  treating  of 
"exchangeable  value."  Thus,  although  in  the  explana- 
tion of  relative  values  he  successfully  took  "value"  in 
the  sense  of  exchange -value,  yet  in  the  matter  which 
concerns  us  here,  he  deviated  and  took  "value"  in  the 
sense  of  cost-value.  In  consequence  of  this  deviation, 
the  quality  of  invariability  in  "value"  which  he  desired 
in  money  was  invariability  in  cost-value  (pp.  29-30). 

§3.  Ricardo's  slip  was  even  less  excusable  than 
Adam  Smith's.  Adam  Smith  could,  by  a  common  mis- 
use of  language,  include  labor  along  with  commodities 
among  the  things  purchasable,  which  measure  the  ex- 


60  HISTORICAL   SUE  VET 

change -value  of  ain-tliing  that  purchases  or  can  pur- 
chase them.  But  the  labor  which  Ricardo  used  as  his 
measure  of  value  was  not  the  supposed!}'  purchasable 
object,  but  the  amount  of  effort  needed  for  producing  the 
article.  This  labor  was  by  Adam  Smith  called  the  "real 
price"  of  the  article,  and  the  application  to  it  of  this 
term,  though  faulty,  was  better  than  Ricardo's  treatment 
of  it  as  the  "real  value"  of  the  thing.  If  Ricardo  had 
called  it  the  "cost-value"  or  the  "real  cost-value"  of  the 
thing  (or  had  confined  the  last  complete  term  to  the 
labor-cost  of  production  at  the  least  fertile  source 
worked),  his  language  would  have  been  unobjection- 
able, and  it  would  have  led  to  different  thought. 

What  it  is  necessary  to  notice  is  that  both  Adara 
Smith  and  Ricardo  made  a  fundamental  mistake  which 
has  been  fatal  in  economics.  This  fundamental  mistake 
lies  in  their  classifications  of  value.  They  both  pri- 
marily divided  value  into  use-value  and  exchange-value, 
and  properly  dismissing  the  former,  confined  their  at- 
tention to  the  latter.  This  they  then  divided  into  two 
sub-species,  nominal  and  real  value,  though  they  each 
conceived  of  these  somewhat  differently.  The  former  of 
these  they  now  treated  almost  as  they  had  treated  use- 
value;  they  paid  little  attention  to  it  and  devoted  most 
of  their  attention  to  the  latter.  Such  double  dichotomy 
was  the  great  misstep.  For  the  "real  values"  they  each 
had  in  mind  are  not  sub-classes  under  exchange -value, 
but  are  coordinate  classes,  alongside  of  exchange-value, 
under  value  alone.  If  this  had  been  perceived,  Adam 
'  Smith  would  have  given  us  three  kinds  of  value:  use- 
value,  exchange-value,  and  "real  value"  in  the  sense  of 
esteem -value;  and  Ricardo  would  have  given  us  three 
kinds  of  value,  the  first  two  overlapping,  and  the  third 


ADAM   SMITH   AND    RICARDO  61 

being  "real  value"  in  the  sense  of  cost-value;  by  com- 
bining which  their  followers  would  have  recognized  four 
kinds  of  value,  and  would  not  have  had  to  wait  till 
Roscher  pointed  out  the  latter  triehotoin}'  and  Jevons! 
the  former.  A  further  mistake  was  to  designate  any  of  i 
these  kinds  of  value  by  the  term  "real  value,"  which  isi 
not  descriptive,  but  characteristic.  To  call  one  of  the 
kinds  of  value  "real"  is  to  imply  that  it  is  the  principal 
or  the  most  important  kind  of  value.  But  even  if  the 
one  kind  which  is  truly  the  principal  and  most  important 
is  rightly  selected,  it  deserves  to  have  a  name  of  its  own 
instead  of  being  called  only  by  its  character  of  being  the 
most  important.  It  is  questionable,  however,  whether 
any  one  of  the  kinds  of  value  can  simply  in  general  be  re- 
garded as  the  principal  and  most  important;  for  it  may 
be  that  one  of  the  kinds  is  the  most  important  for  one 
purpose  and  another  for  another.  At  all  events  the  se- 
lection of  the  most  important  would  seem  to  demand 
some  preliminary  investigation  into  the  natures  of  all 
the  kinds  and  comparison  of  their  nses,  to  see  which  de- 
serves to  be  regarded  as  the  most  important — or  as  the 
most  important  for  one  or  for  another  purpose.  But 
such  preliminary  investigation  is  precisely  what  Adam 
Smith  and  Ricardo,  the  recognized  founders  of  the  so- 
called  "classic"  political  economy,  did  not  perform. 
They  each  started  out  from  the  very  beginning  by , 
characterizing  one  kind  of  value  as  the  most  important 
by  calling  it  alone  "real  value."  And  so,  in  our  sub- 
ject, they  immediately  jumped  to  the  conclusion,  the  one 
that  money  should  be  stable  in  esteem -value,  and  the 
other  that  money  should  be  stable  in  cost-value,  without 
basing  these  conclus;ions  on  any  investigation  whatso- 
ever.    Not  the  slightest  reason  is  offered  by  either  of 


62  HISTORICAL    SURVEY 

them  to  show  why  money  ought  to  be  stable  in  esteem- 
value  rather  than  in  cost -value  or  in  exchange -value,  or 
why  it  ought  to  be  stable  in  cost -value  rather  than  in 
esteem -value  or  in  exchange -value.  They  merely  in- 
volved these  doctrines  in  their  use  of  the  word  "real." 
And  yet  it  is  upon  this  flimsy  basis  that  the  mass  of 
modern  economics  is  founded.  But  fortunately  some 
economists  have  not  been  imposed  upon  by  the  mere  use 
of  a  word  originated  by  these  leaders.  Also  the  inher- 
,  ent  inconsistency  in  this  use  of  language  and  wrong 
classification  of  values,  has  necessarily  involved  the  fol- 
lowers in  the  inconsistency  of  admitting  also  exchange- 
value  into  their  conception  of  the  value  in  which  money 
ought  to  be  stable. 

§4.  Adam  Smith  and  Ricardo  being  divided,  their 
followers  in  the  so-called  "classic"  school  would 
properly  separate  into  two  branches.  Into  two  such 
branches  some  of  them  did,  in  fact,  segregate  them- 
selves; so  that  we  have  for  review  the  followers  of 
Adam  Smith  forming  one  line,  and  the  followers  of 
Ricardo  forming  another.  But  not  all  their  followers 
recognized  the  distinction  between  the  apparently  but 
slightly  differing  positions  concerning  the  relation  of 
value  to  labor  ;  so  that  we  shall  find  many  economists 
retaining  both  the  labor  standards.  And  this  happens 
generally  in  connection  with  another  confusion.  As 
Adam  Smith  and  Ricardo  both  used  the  term  "ex- 
changeable value "  to  describe  the  principal  economic 
value,  and  as  they  both  used  not  only  this  term,  but 
the  term  "value"  itself,  in  the  sense  of  exchange -value 
proper  as  well  as  in  one  each  of  the  other  two  kinds  of 
value,  it  was  only  natural  for  their  followers  to  fall  into 
confusion  not  only   between    the   two  kinds  of   labor- 


ADAM   SMITH  AND    EICABDO  63 

value  on  which  the  leaders  parted,  but  also  between 
these  and  the  exchange -value  which  the  leaders  united 
in  maintaining.  We  shall  therefore  find  a  line  of 
economists  who  either  have  held  both  or  all  the  doc- 
trines together,  or  have  passed  alternately  from  the  one 
to  the  other  (or  others)  without  giving  us  opportunity 
to  pin  them  down  to  one  consistent  opinion.  Slightly 
different  from  these,  and  classifiable  into  another  line, 
are  those  who  have  passed  from  the  one  doctrine  to  the 
other  (or  others),  holding  the  one  at  one  time  of  life, 
in  one  or  more  works,  and  the  other  (or  others)  at 
another  time  of  life,  in  other  work  or  works,  many  of 
them  without  seeming  to  be  conscious  of  the  transition. 
After  reviewing  these,  it  will  be  in  order  to  trace  the 
line  of  dissenting  voices  of  those  who  call  back  to  the 
older  conception  that  money  ought  to  be  stable  in 
exchange -value  proper,  or  who  dwell  upon  the  sense 
of  exchange -value  in  the  economic  terms  "exchangeable 
value"  or  "value"  simplj'.  Such  economists  stand, 
in  this  respect,  out  of  the  succession  of  Adam  Smith 
and  Ricardo,  although  many  of  them  may  have  thought 
they  were  merely  using  their  leaders'  idea  of  "exchange- 
able value."  Lastly,  in  recent  times,  there  are  econo- 
mists who  have  directly  sought  to  occupy  a  position 
midway  between  advocacy  of  money  stable  in  exchange - 
value  and  advocacy  of  money  stable  in  esteem -value  or 
cost -value.  Several  lines  thus  present  themselves, 
along  which  to  review  the  opinions  of  later  writers  ; 
and  in  each  we  may  pass  in  historical  sequence  from  the 
time  of  Ricardo  down  to  the  present. 


64  HISTORICAL   SURVEY 

CHAPTER  III 

FOLLOWERS    OF    ADAM    SMTH 

§1.  Outside  of  England  the  subject  was  little  dis- 
cussed, or  the  foreign  economists  fell  between  the  two 
English  schools.  In  France  "the  natural  and  necessary- 
wage"  was  pronounced  to  be  the  standard  bv  Canard;* 
and  the  wages  standard  was  held  in  Germany  by  Von 
Jakob  and  by  Kudler.t  The  treatment  seems  to  have 
been  superficial.  We  are,  therefore,  mostly  concerned 
with  the  English.  Among  the  English  the  principal 
follower  of  Adam  Smith  and  opponent  of  Ricardo  was, 
in  the  latter  part  of  his  life,  Malthus. 

§2.  Malthus,  in  his  later  works,  has  the  merit  of 
being  perhaps  the  first  to  point  out  that  an  inquiry  into 
the  measures  of  value  is  different  from  an  inquiry  into 
the  causes  of  value  (p.  83).+  He  argued  at  length 
against  the  cost-of-production  theory  of  relative  values 
(pp.  85-93),  and  maintained  the  demand -and -supply 
theory  (pp.  61-82),  although  he  admitted  that  in  most 
articles  there  is  some  dependence  upon  the  cost  of  pro- 
duction through  the  influence  of  this  upon  the  supply. 
But  he  sought  after  a  measure  of  value,  or  standard  of 
value,  through  the  course  of  time,  independent  of  his 
theory  of  what  causes  the  relative  values  of  things  at  any 
given  time  and  place.  Now,  by  "value"  unspecified 
saying    that    he   meant   always   "value   in   exchange" 


*  Principes  d''iconomie  politique,  Paris,  1801,  p.  73. 
t  According  to  Rau,  Op.  cit.  §  179. 

J  References  not  otherwise  accounted  for  are  to  the  Principles  of 
political  economy,  2d  ed.  1&3G. 


FOLLOWERS    OF  ADAM   SMITH  65 

(p.  50),  he  averred  that  "the  question  of  the  existence 
of  a  measure  of  value  depends  upon  the  sense  in  which 
we_understand  the  term  vahie  in  exchange"  (p.  118). 
In  an  earlier  work,  Definitions  in  Political  Economy 
(London,  1627),  in  which  he  rarely  used  the  full  terms 
"value  in  exchange"  or  "exchangeable  value,"  but 
contented  himself  with  the  bare  term  "value,"  he  wrote: 
"Whenever  mention  is  made  of  the  value  of  a  commod- 
ity at  different  periods,  I  have  always  thought  that  a 
reference  has  been  intended  either  to  its  general  power 
of  purchasing,  or  to  something  calculated  to  express 
the  estimation  in  which  it  Avas  held  at  these  different 
periods,  founded  on  the  state  of  its  supply  compared 
with  the  demand,  or  the  elementary  costs  of  produc- 
tion" (p.  1G9).  And  wanting  one  definition  of  value, 
because  these  two  conceptions  of  value  often  part  com- 
pany, he  thought  it  better  to  confine  the  term  "value" 
to  the  latter  of  these  senses  {ih.  p.  181).  For  this 
preference  he  gave  several  reasons,  one  of  which  is  the 
impossibility  of  any  accurate  measurement  of  the  former 
{ih.  pp.  182,  205),  another  that  the  latter  is  more 
conformable  to  popular  usage  {ih.  p.  182),  and  another 
that  "labor  best  represents  an  average  of  the  general 
mass  of  products"  {ih.  pp.  205,  206),  which  is  precisely 
what  it  does  not  do.  He  therefore  laid  down  this  defi- 
nition :  "The  value,  market  value,  or  actual  value  of  a' 
commodity  at  any  place  or  time"  is  "the  estimation  in 
which  it  is  held  at  that  place  and  time,  determined  in 
all  cases  by  the  state  of  the  supph*  compared  with  the 
demand,  and  ordinarilj''  by  the  elementary  costs  of 
production  which  regulate  that  state"  {ih.  pp.  242-3), 
These  views  he  retained  in  the  later  edition  of  his 
Principles,  with   the   changes   only   that   he   now   fre- 


66  HISTORICAL    SUE  VET 

quently  introduced  the  full  terms  "value  in  exchange" 
or  "exchangeable  value"  where  he  had  before  used 
merely  the  term  "value,"  and  that  he  now  recognized 
"three  sorts  of  value"  (p.  60).  The  one  of  these  is 
"va.lue  in  use,"  which  he  dismissed  from  view.  Both 
the  other  two  he  called  "value  in  exchange"  or 
"exchangeable  value,"  but  distinguished  the  one  as 
"nominal  value  in  exchange,"  or  "the  power  of  pur- 
chasing generally"  (p.  60  n),  or  "the  general  power 
of  purchasing"  (p.  58),  and  the  other  as  "intrinsic 
value  in  exchange,"  or  "the  power  of  purchasing  arising 
from  intrinsic  causes"  (pp.  60,  111).  In  regard  to  the 
former  of  these,  the  second  kind  of  value,  dropping  the 
epithet  "nominal,"  he  twice  defined  "value  in  exchange" 
or  "exchangeable  value"  as^  "the  relation  of  an  object 
to  some  other  or  others  in  exchange"  (pp.  50,  61). 
This  is  a  definition  of  exchange-value  proper.  To  the 
third  kind  of  value,  the  second  kind  of  "exchangeable 
value,"  he  applied  the  definition  above  given  of  "value" 
(p.  60),*  or  modified  it  into  this:  "the  estimation  in 
which  a  commodity  is  held,  founded  on  the  desire  to 
possess,  and  the  difficulty  of  obtaining  possession  of  it" 
(p.  60). t  Here  we  have  three  of  our  four  kinds  of 
value,  use-value,  excJiange- value,  and  esteem-value, 
clearly  defined  as  to  their  nature,  but  cumbrously 
distinguished  by  the  phrases  applied  to  them.  Although 
he  made  the  division  into  "three  sorts,"  yet  by  giving 
the  same    general   name,  "exchangeable  value,"  to  the 

•Repeated  on  pp.  109,  110,  111,  122,  as  before,  as  the  definition  of 
"value"  simply. 

tBy  "difliculty  of  obtainin;?  possession  of  it "  he  meant  not  the 
difficulty  of  producing  it,  but  the  difliculty  of  procuring  it  from  those 
who  produce  it  — the  "price"  or  cost  in  labor  which  the  purchaser  has 
to  pay  for  it. 


FOLLOWERS    OF  ADAM   SMITH  67 

last  two,  be  virtually  reunited  them,  and  so  still 
retained  the  old  double  dichotomy.  His  nomenclature 
being  cumbrous,  he  recognized  that  people  could  not  be 
expected  always  to  use  for  the  last  kind  of  value  either 
the  terra  "intrinsic  value  in  exchange"  or  the  phrase 
"purchasing  power  arising  from  intrinsic  causes,"  nor 
did  he  pretend  to  do  so  himself.  But  he  wanted  us  all, 
when  we  use  the  abbreviated  expression  "exchangeable 
value,"  always  to  use  it  only  in  this  last  sense  (p.  119). 
He  even  had  the  hardihood  to  pretend  that  already  this 
is  the  popular  meaning  not  only  of  the  term  "value" 
(p.  122),  but  of  the  term  "exchangeable  value" 
(p.  118),  giving  some  reasons  for  so  saying  (pp.  58- 
59),  which  at  best  apply  only  to  the  term  "value"  and 
not  to  the  term  "exchangeable  value."*  And  stripping 
the  term  still  further,  the  naked  term  "value"  he 
would  of  course  have  us  use  only  in  this  sense.  Here 
there  is  less  likelihood  of  ambiguity;  but  still  there  is 
much  likelihood  of  ambiguity,  since  the  term  "value" 
alwaj's  has  been,  and  always  is,  used  also  in  the  sense 
of  mere  purchasing  power. t 


*  On  pp.  121-2  he  objects  to  using  the  term  "value"  in  the  sense 
of  exchange-value  proper,  on  the  ground  that  it  would  then  be  synony- 
mous with  "price."  This  only  applies  to  particular  exchange-value, 
not  to  general  exchange-value,  which  is  very  different  from  "price." 
It  also  does  not  show  why  the  terra  "exchangeable  value"  should  be 
used  in  the  sense  in  which  he  would  use  the  term  "value."  His  only 
reason  for  wanting  this  seems  to  be  that  Adam  Smith  had  done  so.  Yet 
he  now  objects  to  Adam  Smith's  definition  of  "value"  in  the  sense  of 
"exchangeable  value"  as  purchasing  power  simply,  p.  117,  although  we 
have  seen  him  make  the  same  sort  of  definition  himself.  He  might 
much  better  have  objected  to  Adam  Smith's  mixing  up  "value,"  in 
the  sense  of  esteem-value  with  "exchangeable  value,"  instead  of 
following  his  example. 

tThe  term  "power  of  purchasing"  Malthus  would  leave  us  in  the 
general  sense  of   exchange-value  proper.     His  position   may  be   made 


68  HISTORICAL    SURVEY 

Having  this  conception  of  "value"  as  "intrinsic 
value  in  exchange,"  defined  as  "the  estimation  in  which 
a  commodity  is  held"  (for  the  cause  of  the  property  has 
no  business  to  be  included  in  the  definition),  Malthus 
connected  it  with  Adam  Smith's  wages  standard  instead 
of  with  Ricardo's  cost-of-production  standard.  He  did 
so  because  he  perceived  that  the  variable  elements  of 
time  and  profits  disturb  the  proportions  in  which  com- 
modities exchange  relatively  to  the  labor  bestowed  upon 
their  production,  so  that  the  difficulty  people  in  general 
have    in    procuring   commodities    does   not    correspond 


plainer  by  quoting  two  more  passages  from  his  Definitions:  "Thefe  is  the 
greatest  difference  imaginable  between  an.  increased  power  in  any  object 
of  purchasing  other  goods,  arising  from  its  scarcity  and  the  increased 
difficulty  of  procuring  it;  and  the  Increase  of  its  power  to  purchase 
other  goods  arising  from  the  increased  plenty  of  such  goods  and  the  in- 
creased facility  of  procuring  thera,"  p.  131;  "The  moment  we  come  to  in- 
quire into  the  variations  of  the  values  of  commodities  at  different 
periods,  we  must,  with  any  view  to  precision  and  utility,  draw  a  marked 
line  of  distinction  between  a  variation  in  the  power  of  purchasing  de- 
rived from  causes  affecting  the  particular  purchasing  commodities,  and 
the  variations  in  the  power  of  purchasing  which  may  arise  from  causes 
operating  upon  the  purchased  commodities.  We  must  confine  our  atten- 
tion exclusively  upon  the  former,"  pp.  186-7.  These  are  the  distinctions 
which  he  later  in  the  Principles  describes  as  variations  of  purchasing 
power  due  to  intrinsic  causes  (residing  in  the  article  in  question 
whose  purchasing  power  is  varying),  and  as  variations  of  purchasing 
power  due  to  extrinsic  causes  (residing  outside  the  article  in  question,  in 
the  other  articles  over  which  its  purchasing  power  is  varying),  pp.  59, 
60n,  acknowledging  indebtedness  for  these  terms  to  Senior,  pp.  56-7. 
The  difference,  in  fact,  is  so  great  that  in  the  former  case  it  is  variation 
in  the  cost-value  or  esteem-value  of  the  article  in  question,  and  in  the 
latter  it  is  opposite  variation  in  the  cost-values  or  esteem-values  of  the 
other  articles,  while  it  is  implied  that  in  the  former  case  the  other 
articles  keep  their  cost-values  or  esteem-values  constant,  and  that  in 
the  latter  the  article  in  question  keeps  its  cost-value  or  esteem-value 
constant.  But  the  fact  that  there  is  such  a  difference  is  not  a  reason 
why  we  should  confine  our  attention  onlj'  to  one  of  these  variations. 
Another  case  is  overlooked  (except  once  in  Principles,  p.  58).     This  is 


FOLLOWERS   OF  ADAM   SMITH  69" 

with  the  diflieulty  the  producers  have  in  producing 
them.  But  the  estimation  in  which  commodities  are 
held  is  founded  upon  the  difficulty  people  have  in  get- 
ting possession  of  them.  Hence  he  concluded  that  "if 
the  real  value  of  a  commodity  be  considered  as  synony- 
mous with  the  estimation  in  which  it  is  held,  such  value 
must  be  measured  by  the  quantity  of  labor  which  it  will 
command,  and  not  by  the  quantity  worked  up  in  it."* 
Having  thus  readopted  Adam  Smith's  standard,  Malthus 
stuck  to  it.  We  have  seen  that  Adam  Smith  admitted 
also  commodities  into  his  standard  of  "exchangeable 
value,"  because  we  exchange  the  article  whose  value  is 


when  the  cost-value  or  esteem-value  of  the  article  in  question  varies  in 
the  same  proportion  as  the  cost- values  or  esteem-values,  individually  or 
collectively  (on  the  average),  of  the  others.  For  now  the  purchasing 
power  of  the  article  in  question  remains  constant,  and  this  constancy  is 
due  both  to  intrinsic  and  to  extrinsic  causes.  This  case  calls  for  attention 
surely  as  much  as  the  others;  which  shows  that  the  action  of  extrinsic 
causes  must  also  be  taken  into  consideration.  Now  in  both  the  above 
passages,  as  elsewhere  always,  Malthus  allows  that  in  both  the  two 
cases  cited  there  is  variation  in  the  purchasing  power  of  the  article  in 
question,  but  only  in  one  of  them  will  he  allow  that  there  is  variation  in 
the  "exchangeable  value"  of  the  article  (while  in  the  last  supposition  he 
would  allow  the  "general  purchasing  power"  to  be  constant,  but  not  the 
"exchangeable  value").  It  is  thus  that  he  uses  "exchangeable  value"  in 
the  sense  of  esteem-value,  although  the  only  proper  sense  the  term  can 
possibly  have  is  precisely  the  identification  which  Adam  Smith  made  of 
it  with  "purchasing  power,"  and  Malthus  shows  not  a  particle  of  reason 
why  "exchangeable  value"  should  be  differentiated  from  "purchasing 
power,"  nor  anybody  else  — nor  Adam  Smith  when  he  also  made  this 
differentiation.  Of  course,  however,  Malthus  did  show  that  in  the  latter 
of  his  two  cases  the  article  in  question  may  be  said  to  remain  constant 
in  "value,"  alth  nigh  its  purchasing  power  or  exchange- value  is  varying. 
But  this  is  precisely  because  the  term  "value"  has  been,  and  is,  popu- 
larly used  in  another  sense  beside  either  use-value  or  exchange-value, 
viz.  as  esteem-value  (if  not  also  as  cost-value). 

*Defhiitinnit,  pp.  116-7;  cf.  Principles,  pp.  82,  92,  111,  and 
passim.  Malthus  went  further  than  Adam  Smith  and  denied  the  cost- 
of-production  theory  of  relative  values  even  in  primitive  times,  pp.  85-8. 


70  HISTORICAL    SURVEY 

being  measured  for,  or  with  it  purchase,  not  only 
labor,  but  other  commodities.  But  Malthus  has  no  con- 
cern in  his  improved  conception  of  "intrinsic  value  in 
exchange,"  whence  all  notion  of  exchange  has  been 
eliminated,  for  the  articles  exchanged  or  purchased,  and 
he  resolutely  keeps  commodities  out  of  his  standard.* 
For  him  the  measure  of  the  "exchangeable  value"  of 
money  is  wages  alone — and  wages  alone  of  "standard 
labor"  (pp.  Ill,  112),  which  he  finds  in  "common  agri- 
cultural labor  "  (p.  96) ,  "  estimated  in  an  average  through- 
out the  year,"  because  the  labor  used  "must  be  reduced 
to  labor  of  one  description  and  of  the  lowest  denomina- 
tion,"t  into  which  "every  other  kind  of  labor  is  resolva- 
ble" (p.  116).  He  uses  wages  in  this  way  without  re- 
gard to  "whether  the  quantities  ...  of  necessaries 
paid  to  the  laborer  be  great  or  small,"  on  the  ground, 
adopted  from  Adam  Smith,  that  whatever  be  this 
quantity,  the  "value"  of  it,  as  a  whole,  "is  always  the 
same"  (p.  114),  and  if  the  laborer  gets  more  at  one  time 
or  place  than  at  another,  this  does  not  mean  that  his 
labor  is  more  valuable,  but  that  the  value  of  the  individ- 
ual commodities  is  less  (pp.  98-110).  Thus  he  con- 
ceived of  the  "value  of  money"  remaining  the  same  so 
long  as  "the  money  price  of  the  standard  labor"  remains 
sjable,  whatever  be  the  changes  in  the  prices  of  com- 
modities, the  changes  in  the  prices  of  any  and  even  of 
all  commodities  being  then  ascribable  to  "causes  ex- 
clusively affecting  the  commodities,"  and  being  employ- 
able as  indicating  changes  of  "value"  only  in  the  com- 


*He  does  not  appear  to  use  the  phrase  "to  purchase  labor."  He 
generally  speaks  of  the  labor  which  a  thing  "commands,"  although  oc- 
casionally speaking  of  the  labor  the  thing  "exchanges  for." 

^Definitions ,  pp.  257-8. 


FOLLOWERS    OF  ADAM  SMITH  71 

modities  themselves;  but  a  general  rise  or  fall  in  the 
money  price  of  labor  he  considered  a  sign  of  a  fall  or 
rise  in  "the  elementary  cost  of  obtaining  money,"  and 
hence  of  a  fall  or  rise  in  the  "value  "  of  money  (p.  131) . 
Herein  is  involved  the  distinction  already  referred  to  be- 
tween the  "general  power  of  purchasing"  and  "intrinsic 
value  in  exchange,"  by  the  latter  being  meant  purchas- 
ing power  conceived  as  varying  only  through  intrinsic 
causes,  and  by  the  former  purchasing  power  allowed  as 
varying,  whenever  the  quantities  purchased  vary,  with- 
out regard  to  what  or  where  the  causes  may  be  (p.  58). 
"The  general  power  of  purchasing,"  says  Malthus,  "can- 
not with  any  sort  of  propriety  be  considered  as  repre- 
senting the  variations  in  its  exchangeable  value.  .  .  . 
The  exchangeable  value  of  a  commodity  can  only  be 
proportioned  to  its  general  power  of  purchasing  so  long 
as  the  commodities  with  which  it  is  exchanged  continue 
to  be  obtained  with  the  same  facility"  (pp.  58-9,  cf.  p. 
95).  Thus  it  happens  that  while  Malthus  had  a  clear 
perception  of  what  is  meant  by  exchange -value  proper, 
qr^simple  purchasing  power,*  and  also  of  what  is  meant 
b^a  measure  of  this;  and  although  he  admitted  that  for 
some  purposes  a  measure  of  this  would  be  desirable  (pp. 
57,  119) :  yet  he  thought  that  such  a  measure  would  not 
be  a  measure  of  "value,"  or  even  of  "exchangeable 
value,"  but  of  wealth  (pp.   58,    119-20),  and  therefore 


*  He  was  one  of  the  first  to  recognize  the  following:  "While  com- 
modities are  merely  compared  with  each  other,  it  is  unquestionably  true 
that  they  cannot  all  fall  together,  ...  or  all  rise  together.  But  when 
they  are  compared  with  the  costs  of  production,  .  .  .  it  is  evident  that 
.  .  .  they  may  all  fall  or  rise  at  the  same  time,"  Definitions,  p.  64,  i.  e. 
while  they  can  all  fall  or  rise  together  in  cost-value  or  in  esteem-value, 
they  cannot  all  fall  or  all  rise  together  in  exchange-value. 


72  HISTORICAL   SURVEY 

not  of  what  we  are  seeking.*  Instead,  he  thought  we 
all  mean  by  "measure  of  value"  a  measure  of  "the  diffi- 
culty with  which  a  commodity  is  obtained"  (p.  84,  cf.  p. 
120 n),  or  of  "the  desire  to  possess  and  the  difficulty  of 
obtaining  possession  of  commodities,  or  the  limitation 
of  their  supply  compared  with  the  demand"  (p.  109), 
or,  in  short,  of  "the  estimation"  in  which  they  are  held 
(p.  56).  Thus  his  conception  is  of  a  measure  of  es- 
teem-value, and  not  of  exchange -value  proper,  although 
he  speaks  of  it  as  a  measure  of  "exchangeable  value." 
And  what  he  wanted  in  a  monetary  sj^stem  stable  in 
"value  "  and  serviceable  as  a  measure  of  "value,"  or  in 
his  phraseology  of  "exchangeable  value,"  was  stability 
in  esteem- value  (cf.  p.  120). t  But  the  reason  he  gives 
for  this  is  very  inadequate.  He  wants  in  money  stability 
of  esteem -value  simply  because  he  considers  esteem -value 
is  the  kind  of  value  which  people  generally  have  iu 
mind  when  they  speak  of  "value,"  or  even  when  they 
speak  of  "exchangeable  value"  (which  last  is  absurd), 
and  because  he  wants  this  meaning  of  the  word  "value" 
to  be  held  as  the  only  proper  meaning  of  the  term  (and 
even  of  the  term  "exchangeable  value").  It  is  per- 
fectly true  that  we  may  want  a  measure  of  esteem -value 
(difficulty  of  obtaining  possession  of  goods),  as  also  of 
cost -value  (difficulty  of  producing  goods) ;  but  it  is 
still  true  that  we  may  want  a  measure  of  the  quantity  of 
commodities  a  given  article  possessed,  especially  money, 


*And  yet  on  pp.  303-7  he  recommends  his  own  measure  of  value  as 
especially  serviceable  for  measuring  wealth. 

tit  is  curious,  however,  that  Malthus,  in  behalf  of  the  laboring 
classes,  showed  preference  for  rising  prices  rather  than  for  falling  prices, 
pp.  25C-7,  cf.  p.  240.  This  was  held  over  from  the  Essay  on  population; 
see  in  9th  ed.  pp.  221,  377-8.  He  had  even  followed  Hume  on  this  sub- 
ject in  Orounds  of  an  opinion,  etc.,  1815,  p.  32. 


FOLLOWERS   OF  ADAM   SMITH  73 

will  exchange  for.  The  one  want  does  not  exclude  the 
other  want.  And  even  if  a  person  does  think  the 
knowledge  obtained  b\'  means  of  the  one  measure  is 
more  desirable,  or  more  interesting,  than  the  knowledge 
obtained  by  means  of  the  other,  this  is  not  a  sufficient 
reason  for  wanting  money  to  be  stable  in  the  one  kind  of 
value  rather  than  in  the  other.  Another  line  of  reason- 
ing altogether  is  needed  to  show  what  is  wanted  here  ; 
and  in  Malthus's  work,  as  in  so  many  others,  this  line 
of  reasoning  is  conspicuous  only  by  its  absence. 

One  reason  given  by  Malthus  deserves  to  be  recalled. 
This  is  the  difficulty,  or,  as  he  said  without  inquiry,  the 
iragiossibility,  of  measuring  exchange-value  proper.  He 
here  takes  a  wholly  unsatisfactory  attitude.  No  prob- 
lem is  scientifically  settled  by  abandoning  one  suggested 
solution  because  of  some  fancied  difficulty  or  impossi- 
bility of  carrying  it  out,  especially  when  no  attempt  is 
made  at  carrying  it  out.  Malthus  repeats  this  objection 
in  his  Principles,  saying  it  is  quite  certain  there  can  be 
no  measure  of  the  value  of  an  object  in  the  sense  of  its 
mere  exchange-value,  because  this  can  be  affected  as 
well  by  changes  in  other  objects  as  by  changes  in  the 
object  itself  (p.  117)  ;  which  is  no  reason  at  all,  since 
a  measurement  of  variations  that  takes  no  account  of 
their  causes  is  simpler  than  a  measurement  that  must 
concern  itself  with  causes.  Or  he  limits  this  negation 
by  saying  that  no  such  measure  is  possible  with  any 
approach  toward  precision  (pp.  IH,  118),  a  reason 
assigned  for  this  being  that  "itis  absolutely  impossible 
to  apply  all  goods  as  a  measure"  (p.  119 n).  On  the 
other  side,  he  thinks  he  can  accurately  measure  varia- 
tions in  his  "power  of  purchasing  arising  from  intrinsic 
causes,"  because  "we  are  able  to  measure  the  variations 


74  HISTORICAL   SURVEY 

in  this  power  by  the  varying  quantity  of  a  specific 
object  for  which  it  will  exchange"  (p.  Ill),  namely, 
wages — and  wages  only  of  agricultural  laborers.  Here 
is  palpable  inconcinnity.  If  he  is  to  measure  varia- 
tions in  the  "intrinsic  value  in  exchange,"  or  esteem- 
value,  of  money  by  its  command  over  labor,  he  ought, 
theoretically,  to  employ  all  wages,  and  not  only  these, 
but  all  earnings.  And  if  he  will  not  take  less  than  "all 
goods  "  for  the  commodity  standard,  he  ought  not  to 
take  less  than  all  earnings  for  the  labor  standard.  To 
reduce  the  latter  to  the  wages  only  of  agricultural  labor 
is  the  precise  analogue  of  reducing  the  former  to  the 
prices  only  of  corn  ;  which  is  rejected  by  almost  every- 
body with  contempt.  Thus  if  he  had  tried  really  to  be 
accurate  with  his  own  standard,  he  would  have  found 
that  standard  just  as  difficult  as  the  commodity  stand- 
ard. In  fact,  the  execution  of  the  labor  standard  is  so 
difficult  that  no  economist  has  ever  yet  attempted  to 
carry  it  out  even  with  the  correctness  it  is  susceptible  of, 
nor  has  anyone  even  so  much  as  made  a  thorough  exami- 
nation of  the  theorj-  of  it;  whereas  much  closer  approxi- 
mation to  theoretical  and  to  practical  truth  has  been 
reached  in  the  case  of  the  commodity  standard.  For 
ouT^ purposes,  then,  it  may  be  noted  that  Malthus  was 
an  advocate  of  stability  of  money  in  esteem -value,  with- 
out any  sound  reason  for  his  position. 

§  3.  Another  English  economist  of  note,  a  younger 
contemporary  of  Malthus,  Senior,  in  his  Political  Econ- 
omy, first  published  in  the  Encyclopaedia  Metropolitana, 
1836,  and  later  republished  by  itself,  reverted  to  Adam 
Smjth's  position.  Senior  started  out,  however,  with  a 
treatment  of  "value"  altogether  in  the  sense  of  ex- 
change-value   proper.      He    defines   "value"    as   "the 


FOLLOWERS    OF  ADAM   SMITH  75 

capacity  of  being  given  and  received  in  exchange"  (p. 
7)  ,*  and  as  denoting  "a  relation  reciprocally  existing  be- 
tween two  objects,"  which  relation  is  "the  quantity  of 
the  one  which  can  be  obtained  in  exchange  for  a  given 
quantity  of  the  other  "(p.  14).  This  is  a  definition  ap- 
plying only  to  what  he  calls  "one  of  the  specific  values" 
of  the  thing  (p.  16),  But  he  immediately  extends  his 
view  to  what  he  calls  "its  general  value"  (ib.,  ef.  also 
p.  14),  which  he  later  defines  as  "the  quantity  of  all  the 
other  subjects  of  exchange  which  might  be  obtained  in 
return  for  a  given  quantity  of  it"  (p.  96).  He  recog- 
nizes also  that  a  commodity  cannot  remain  unaltered  in 
"value,"  in  this  wide  sense,  while  any  other  is  altered 
(p.  20),  and  that  all  commodities  together  cannot  rise 
or  fall  in  "value"  (p.  21) — all  which  applies  only  to 
general  exchange-value.  Yet  he  further  on  in  the  work 
declares  the  "general  value"  of  a  commodity,  as  just 
defined,  to  be  "incapable  of  being  ascertained"  (p.  96). 
He  therefore  looks  about  for  some  other  way  of  measur- 
ing the  "general  value"  of  a  commodity  than  by  the 
quantities  of  all  the  other  commodities  it  exchanges  for. 
Among  the  "subjects  of  exchange  "  he  has  all  along  in- 
cluded labor.  He  now  affirms  that  "the  best  Standard 
of  Value  for  philosophical  purposes  appears  to  be  the 
command  of  labor"  (p.  187).  He  thus  reverts  to  Adam 
Smith's  standard.  That  this  is  not  a  standard  of  ex- 
change-value proper,  is  plain  even  from  the  reasons 
wjiich  he  himself  assigns.  He  assigns  two.  The  first 
is  shortly  stated  to  be  that  "labor,  next  to  money,  is  the 
principal  subject  of  exchange."  But  labor  is,  philo- 
sophically speaking,  not  a  subject  of  exchange,  of  being 
"given  and  received,"  at  all.     This  ought  to  have  been 

*The  references  are  to  the  separate  edition,  the  fourth,  1858. 


76  HISTORICAL    SURVEY 

recognized  by  Senior.  For  he  had  said  of  the  producers 
of  commodilies  and  of  services,  instancing  a  shoemaker 
and  a  shoeblack,  that  "both  produce  the  same  thing,  an 
alteration  in  the  condition  of  existing  particles  of  mat- 
ter," which,  therefore,  is  the  only  subject  of  exchange; 
"but  our  attention  is  fixed  in  the  one  case  on  the  act,  in 
the  other  on  the  result  of  the  act"  (pp.  51-52),  which 
can  only  mean  that  to  ^peak  of  exchange  of  labor  is 
merely  to  use  a  raetonym  for  speaking  of  exchange  of 
the^ results  of  labor.  The  second  reason  is  that  "labor, 
as  the  principal  instrument  of  production,  as  the  only 
instrument  that  can  be  emploj'ed  at  will  in  the  creation 
of  whatever  is  most  wanted,  varies  less  in  its  general 
value  than  any  other  article  of  exchange."  This  has  the 
defect,  already  noticed  in  a  similar  passage  in  Adam 
Smith,  that  the  term  "general  value"  is  used  without 
any  meaning  whatever.  Senior,  however,  continues  to 
develop  this  reason,  with  obvious  intention  of  putting 
some  meaning  into  this  use  of  the  term.  He  asserts 
that  "the  value  of  the  command  of  labor  is  almost  in- 
variable" when  estimated  in  a  "class  of  objects  most 
coveted  by  man,"  namely  "power  and  preeminence." 
"Two  persons,"  he  continues,  "who,  at  different  times 
or  in  different  places,  can  each  command  the  labor  of 
one  thousand  average  laborers,  may  indeed  enjoy  in 
very  different  degrees  the  comforts  and  conveniences  of 
life;  but  in  power  and  preeminence  in  their  respective 
countries  they  must  be  nearly  on  a  par.  Each  must  be 
one  man  in  a  thousand.  Each  must  be  a  thousand 
times  richer  than  the  mass  of  his  countrymen.  If  two 
shillings  in  Hindostan  will  command  as  many  laborers 
as  twenty  in  England,  a  Hindoo  with  £3,000  a-year  is, 
generally  speaking,  as  great  a  man  in  Hindostau  as  an 


FOLLOWEBS   OF  ADAM  SMITH  77 

Englishman  with  £30,000  a-year  in  England."  But 
this  is  a  standard  of  comparative  wealth.  The  Hindoo 
is  admitted  not  to  have  as  great  a  command  over  the 
comforts  and  conveniences  of  life  as  the  Englishman, 
consequently  not  to  be  so  rich,  properly  speaking:  he  is 
merely  considered  to  be  as  rich,  compared  with  other 
Hindoos,  as  the  Englishman  is,  compared  with  other 
Englishmen.  This  is  certainly  not  a  Standard  of  Value 
in  the  sense  of  exchange -value.  It  is,  first  of  all,  a 
standard  of  social  position.  But  it  might  be  claimed 
that  a  standard  of  social  position  is  a  standard  of  es- 
teem-value. Two  incomes  that  give  the  recipients  the 
same  social  position  among  their  fellows,  in  England 
and  in  Hindostan,  now  and  a  thousand  years  ago,  might 
seem  to  have  the  same  esteem -value  in  the  eyes  of  the 
recipients  or  their  enviers.  It  may  be  questioned,  how- 
ever, whether  the  command  over  the  same  quantity  of 
labor  gives  everywhere  and  always  the  same  social  posi- 
tion.* If  this  is  not  the  case,  Senior's  added  reason  for 
Adam  Smith's  wages  standard  is  worthless.  Sujice  it, 
however,  for  us,  that  when  Senior  here  wants  money  to 
be  invariable  in  "general  value"  in  this  way,  he  is  not 
only  not  wanting  money  to  be  stable  in  the  "general 
value  "  he  had  himself  before  been  treating  of,  but  he  is 
not  offering  a  single  reason  really  going  to  show  why 
money  should  be  stable  in  this  kind  of  value,  namely 
esteem -value,  rather  than  in  the  other  kind  of  which  he 
had  first  treated, t 


*It  must  be  considered  also  whether  the  same  amount  of  labor  Is  to 
be  measured  by  the  hour  or  by  the  labor-day  of  variable  length. 

tin  a  passage  in  the  early  part  of  the  work  Senior  said  that  a  thing 
is  "steady  in  value"  if  the  causes  of  the  variations  of  its  particular 
values  are  in  the  other  things,  and  so  extrinsic,  instead  of  lieing  in- 
trinsic, to  it  (p.  21).     This  sounds  like  Malthus's  position,  who  indeed 


78  HISTORICAL    SURVEY 

§  4.  The  allusion  by  Senior  to  Adam  Smith's  standard 
of__command  over  labor,  by  means  of  wages,  is  but 
slight;  and  this  slightness  is  an  indication  of  the  ob- 
scuration into  which  the  doctrine  was  passing.  For  a 
long  period  it  was  seldom  advocated,  except  perhaps  by 
socialists.*  In  his  work  On  the  Econonnj  of  Machinenj 
and  Manufcctiires,  London,  1832,  Babbage  refers  to 
Malthus's  proposal  of  this  standard,  and  himself  recom- 
mends it  as  the  best  standard  of  value  at  different  times. 
He  modifies  Malthus's  position,  however,  by  desiring  to 
include  the  wages  of  other  trades  that  "require  but  a 
moderate  exertion  of  skill."  And  then  he  spoils  the 
idea  by  suggesting  another  element  as  useful  though 
not  necessary,  namely,  "an  estimate  of  the  quantity  of 

got  these  terms  from  Senior.  But  Senior's  position  is  very  dififerent. 
He  says  such  a  thing;  is  steady  in  "general  value  "  because  it  is  probable 
that  there  is  compensation  between  the  variations  in  its  particular 
values,  so  that  it  is  likely  to  "command  the  same  average  quantity  as 
before  of  the  general  mass  of  commodities"— and  of  labor  too  (he  seems 
to  be  referring  only  to  short  periods).  The  standard  is  still  the  quanti- 
ties of  the  things  it  exchanges  for.  Now,  in  the  later  part  of  the  work 
when  talking  about  the  philosophical  standard  (only  for  long  periods  and 
distant  climes  ?),  and  confining  it  to  command  over  labor,  he  omits  the 
commodities.  Thus  he  is  inconsistent  with  himself,  and  relapses  from 
Malthus's  firmly  consistent  disregard  of  the  quantities  of  commodities 
back  into  the  ambiguity  of  Adam  Smith,  varying  between  the  mixed 
standard  of  commodities  and  wages  (even  at  times  with  emphasis  on  the 
commodities)  to  the  simple  standard  of  wages.  If,  however,  the  incon- 
sistency be  explained  away  by  supposing  he  would  use  the  commodity 
standard  only  for  short  periods  and  the  wages  standard  principally  for 
long  periods,  this  would  mean  that  the  wages  standard  was  his  true 
standard,  and  the  commodity  standard  is  used  only  for  convenience  on 
the  occasions  when  it  is  not  likely  to  be  wrong.  But  it  would  not  explain 
why  he  did  not  himself  make  his  position  clear.  He  also  leaves  his 
wages  standard  entirely  undescribed,  although,  like  the  rest,  he  seems 
to  have  had  in  mind  only  the  wages  of  the  commonest  labor. 

'Robert  Owen's  notes  representing  an  hour's  labor  or  the  products 
of  an  hour's  labor  seem  to  be  due  as  much  to  Ricardo's  teaching  as  to 
Adam  Smith's. 


FOLLOWERS    OF   ADAM   SMITH  79 

the  food  on  which  the  laborer  usually  subsists,  which 
is  necessary  for  his  daily  support,  compared  with  the 
quantity  which  his  daily  wages  will  purchase,"  without 
telling  us  what  he  would  do  with  this  comparison  (pp. 
160-1).  If  he  would  correct  the  wages  standard  by 
allowing  for  the  quantity  of  food  purchasable,  he  would 
be  really  reverting  to  the  commodity  standard  confined 
to^ foodstuffs.  An  unspoilt  use  of  the  wages  standard 
was  desired  by  another  author,  an  advocate  of  paper 
money.  In  his  Lectures  on  the  Nature  and  Use  of 
Money,  Edinburgh,  1848,  John  Gray,  wishing  the  issues 
to  be  regulated  so  as  to  maintain  the  "  value  "  of  money 
stable,  urged  that  they  be  so  regulated  as  to  maintain 
stable  the  "minimum  wage  of  labor"  (p.  173).  Little 
more  can  be  found  concerning  this  standard  till  1877, 
when  reversion  was  made  to  it  in  a  work  of  some 
pretension  in  political  economy.* 

§5.  In  A  System  of  Political  Economy,  J.  L.  Shad- 
well  uses  "value"  in  the  sense  of  esteem  (p.  90),  and 
recognizes  that  Adam  Smith  so  used  the  term  (pp.  93, 
202).  But  he  makes  no  reference  to  Adam  Smith's 
confusing  use  of  "value"  as  "exchangeable  value,"  and 
himself  never  uses  the  latter  term.  He  also  objects 
to  conceiving  of  labor  as  a  commodity  subject  to  ex- 
change, and  even  to  using  the  expression  "the  value 
oj  labor"  (p.  96);  and  he  interprets  Adam  Smith's 
assertion  about  equal  quantities  of  labor  always  being 
of  equal  value  to  the  laborer  as  merely  meaning  that  a 
day's  labor  is  always  "esteemed  an  equal  hardship  by 
him  who  has  undergone    it"    (p.    96),  and   that   it    is 


*  In  this  work  reference  is  made  to  J.  Cazenove,  Supplement  to 
thoughts  on  a  few  subjects  of  political  economy,  1801,  as  siding  on  tliis 
subject  with  Adam  Smith  against  Ricardo. 


80  HISTORICAL    SURVEY 

"considered  just  as  irksome"  at  one  time  as  at  another, 
whatever  be  the  quantity  of  its  product  (p.  104,  cf. 
p.  103).  Thus  he  maintains  that  people  show  the 
esteem  in  which  they  hold  things  by  the  length  of  time 
they  will  work  to  acquire  them.  Hence  he  more  for- 
mally defines  "value"  to  be  "the  esteem  in  which  com- 
modities are  held,  as  measured  by  the  quantity  of  labor 
which  will  be  given  in  exchange  for  them"  (p.  105)  — 
which  very  much  resembles  Malthus's  definition,  al- 
though Mr.  Shadwell  appears  not  to  be  acquainted  with 
Malthus's  later  writings  in  which  alone  such  a  definition 
appears.  In  particular,  Mr.  Shadwell  says  people  show 
the  esteem  in  which  they  hold  money  by  the  length  of 
time  they  will  work  for  a  given  sum  of  it,  or  inversely 
by  the  sum  of  money,  or  wages,  they  get  for  a  given 
quantity  of  their  labor  (ef.  p.  101).  The  same  he 
thinks  true  of  persons  who  do  not  have  to  work  for 
their  living  :  money  is  valuable  to  them  according  to 
the  quantity  of  labor  it  will  purchase,  that  is,  inversely 
according  as  wages  are  high  or  low  (p.  92).  Thus,  in 
general,  the  value  of  money,  being  "equal  to  the  quantity 
of  labor  which  it  enables  its  possessor  to  induce  others 
to  perform  for  him"  (p.  95),  is  measured,  in  his 
opinion,  by  the  inverse  of  wages  —  and  only  of  wages, 
since  by  shifting  the  point  of  view  to  the  side  of  the 
emploj'ers  of  labor  all  earners  of  money  except  the 
employed  are  left  out  of  view.  It  is  by  this  standard 
he  would  measure  the  depreciation  of  gold  since  the 
great  discoveries  in  California  and  Australia  (pp. 
203-4),  and  would  determine  how  much  creditors  have 
suffered  by  being  repaid  less  value  than  they  gave 
(p.  219).*     Mr.  Shadwell  recognizes  that  such  a  stand- 

•But  on  p.  292,  when  he  says,  "of  course  the  most  desirable  quality 


FOLLOWERS    OF  ADAM   SMITH  81 

ard  does  not  measure  the  amount  of  comfort  which 
monej'^  enables  its  possessor  to  enjoy,  and  seems  to 
adopt  it  only  because  it  is  "a  simple  and  obvious  one" 
(p,  91)  and  "no  better  standard  has  yet  been  sug- 
gested" (p.  92),  because,  in  default  of  a  better,  "labor 
may  be  taken  for  this  purpose"  (p.  93),  and  because  it 
was  adopted  by  Adam  Smith  (cf  p.  98).  In  his  opinion, 
however,  this  standard  will  not  be  much  wrong  even 
as  a  measure  of  comfort,  since  he  holds  that,  though 
"quite  possible,"  it  is  "not  very  probable"  that  "labor 
may  become  more  efficient  in  all  trades"  (p,  104).  He 
considers  that  "no  better  standard  has  yet  been  sug- 
gested," because  he  declares  himself  unable  to  conceive 
of  general  exchange -value  or  general  purchasing  power 
(p.  93),  and  because  he  asserts  averaging  of  prices  to 
b^ defective  through  inability  to  use  weighting  properly 
(pp.  94,  201-2),  so  that  the  question  whether  a  given 
quantity  of  gold  "will  now  exchange  for  more  of  com- 
modities in  general"  appears  to  him  to  be  "insoluble" 
(p.  202).  In  short,  he  rejects  the  idea  of  general  ex-, 
change-value  as  inconceivable  and  the  commodity  stand-' 
ard  as  unworkable,  and  on  Adam  Smith's  authority 
accepts  "value"  as  meaning onlj^  esteem-value  and  holds 
the  proper  measure  of  the  "value  "  of  money  through  the] 
course  of  time  to  be  the  rate  of  wages.  The  wages  he ' 
would  use  are  those  of  "common  unskilled  laborers," 
principally  agricultural  laborers,  and  he  wants  an 
average  to  be  drawn  (evenly  weighted)  of  the  wages  of 

for  a  standard  of  value  is  that  its  own  value  should  be  invariable,"  he 
argues  that  gold  is  less  variable  in  value  than  silver  because  its  pro- 
duction, being  mostly  by  manual  labor,  is  less  likely  to  be  improved  than 
is  that  of  silver,  which  is  extracted  by  chemical  processes.  This  argu- 
ment he  acknowledges  to  Cherbuliez.  We  shall  meet  with  it  again  in 
earlier  as  well  as  in  later  economists. 


82  HISTORICAL    SURVEY 

[such  labor  in  different  parts  of  the  country  and  to  be 
compared  with  a  similar  average  at  the  other  period 
(pp.  92,  203-5).  But  why  this  simple  average  of 
wages  is  better  than  a  simple  average  of  prices,  or  why 
the  subject  of  weighting  is  so  easily  disposed  of  in  the 
wages  standard  when  it  has  been  a  stumbling  block  to 
him  in  the  commodity  standard,  he  does  not  explain. 
He  recognizes  that  all  wages  (but  not  all  earnings) 
ought  to  be  used,  and  confines  himself  to  some  merely 
through  inability  to  use  all,  and  he  thinks  those  chosen, 
forming  a  majority  of  wages  (earnings  being  left  out  of 
account),  will  approximately  represent  the  rest,  and  not 
cause  any  appreciable  error  (p.  92).  But  this,  too,  is 
the  same  as  the  reason  which  advocates  of  the  com- 
modity standard  employ  for  not  using  all  commodities, 
and  for  inferring  that  their  results  will  not  depart 
appreciably  from  the  truth.  The  wages  especially  of 
agricultural  laborers  he  says  he  has  taken  as  the  stand- 
ard, "because  agriculture  is  less  subject  to  fluctuations 
than  other  trades,  and  therefore  a  change  in  the  rate 
of  wages  is  less  likely  to  be  produced  by  a  cause  pecu- 
liar to  the  trade  itself"  (p.  205).  But  this,  again,  is 
like  the  position  of  some  advocates  of  the  commodity 
standard,  who  would  use  the  prices  only  of  agricultural 
products  as  being  the  least  subject  to  fluctuations  in 
value  arising  from  causes  peculiar  to  themselves.  On 
the  whole,  then,  there  seems  to  be  here,  as  in  the  ease 
of  Malthus,  no  good  reason  for  holding  the  wages 
standard  to  be  simpler  and  more  obvious  than  the 
commodity  standard.  In  both  cases  we  seem  rather  to 
have  the  old  story  of  the  mote  and  the  beam.* 


•  Similar  positions  were  repeated  by  Shadwell  in  Methods  of  measur- 
ing changes  in  the  value  of  gold,  a  paper  read  before  the  British  Asso- 


FOLLOWERS    OF  ADAM   SMITH  83 

The  wages  standard  has  again  been  urged,  in  oppo- 
sition to  the  commodity  standard,  by  a  more  recent 
anti-biraetallist,  who  is  also  an  anti-metallist  in  general, 
sending  his  message  from  far-away  India.  In  a  work 
entitled  Gold  and  Silver  Weighed  in  the  Balance,  Cal- 
cutta, 1888,  T.  I.  Pollard,  who  wants  either  money  to  be 
regulated  in  value  or  contracts  to  be  regulated  in  money, 
so  that  a  constant  "  value  "  shall  always  be  repaid  ac- 
cording to  the  standard  by  which  people  measure 
whether  gold  or  silver  has  appreciated  or  depreciated 
(pp.  7-10,  55),  re  jects_the"  price -level"  standard  on, 
the  ground  that  all  commodities  may  grow  cheaper,  or  ■ 
fall  in  "value,"  together,  and  therefore  an  average  of 
the  fall  of  their  prices  is  no  better  as  an  indication  of  an 
opposite  variation  in  the  "value"  of  money,  which  may 
itself  be  falling  or  otherwise  behaving,  than  an  average 
time  drawn  from  many  incorrect  watches  would  be  of  j 
the  correct  lime  (pp.  25-32).  He  rejects  it  also  because 
it  implies  that  by  "value"  is  meant  merely  the  quantity 
ofjother  commodities  the  thing  will  sell  for,  which  is  a 
meaning  "never  intended  .  .  .  by  the  founder  of  the 
science  of  values"  (p.  34).  Following  Adam  Smith,  he 
means  by  "value"  "the  estimation  in  which  people 
hold"  the  things,  "the  quantity  of  toil  and  trouble 
necessary  to  obtain  possession  of  them,  the  quantity  of 
labor  they  will  purchase  or  command"  {ih.)\  and  as 
purchasing  power,  it  is  purchasing  power,  not  over  com- 
modities, but  over  labor  alone,  that  is  "real  value"  (p. 


ciation  for  the  Advancement  of  Science,  53d  Meeting,  1883,  epitomized 
in  the  Report,  London,  1884,  p.  626:  — labor  the  measure  of  the  value  of 
commodities;  agricultural  wages  to  be  used;  in  England,  1850  to  1882, 
wages  risen  50  %,  therefore  gold  fallen  in  "value"  33J^  %;  little  rise  of 
prices,  therefore  other  things  also  fallen  in  "value"  with  gold. 


84  HISTORICAL    SURVEY 

36).  Hence  not  the  price -level,  but  the  wages- level  is 
tjbe  measure  of  the  "value"  of  money  (p.  37).  It  is,  of 
course,  because  of  this  conception  of  the  meaning  of  the 
word  "value,"  as  esteem-value,  that  he  holds  that  all 
eonimodities  can  rise  or  fall  in  "value"  and  so  cannot 
form  a  constant  standard  of  "value,"  and  that  he  con- 
siders it  absurd  to  sa}^  that  all  commodities  together  are 
constant  in  "value,"  since  this  is  true  only  of  exchange- 
value  proper,  or  purchasing  power  over  commodities 
alone,  which  he  pronounces  a  wrong  definition  of 
value"  (pp.  39-40,  45,  64-5).  He  even  recognizes 
that  he  is  using  "value"  in  the  sense  of  "labor- value" 
instead  of  in  the  sense  of  "exchange-value"  or  "com- 
modity-value" (p.  43);  but  why  the  former  sense  is 
the  only  proper  sense,  he  has  no  reason  to  offer,  except 
that  it  was  so  used  by  Adam  Smith  (cf.  p.  52),  whose 
use  of  "exchangeable  value"  is  again  passed  by.  He 
even  admits  that  a  measure  of  "exchange-  or  commodity- 
value"  is  attainable;*  but  he  declares  it  not  enough, 
not  what  we  want — why  ?  because  it  is  not  the  measure 
of  "rertZ  value"  (p.  60).  Thus  is  the  authority  of 
Adam  Smith  buttressed  by  the  little  epithet  "real."t  At 
all  events,  Mr.  Pollard  makes  advance,  in  that  he  wants 
the  standard  to  be,  not  merely  the  wages  of  one  class  of 
laborers,  but  the  ivages- level,  an  average  (of  some  sort, 
here  still  leaving  indefiniteness)  of  the  wages  in  all  kinds 

*And  in  a  Note  on  p.  154  he  quotes  the  following  from  Cairnes:  "A 
general  rate  of  wages  is  neither  more  nor  less  easy  to  conceive,  neither 
more  nor  less  absurd,  than  general  prices."    Cf.  also  pp.  C7,  79. 

tile  once  impugns  the  authority  of  Adam  Smith  by  saying  that  the 
phrase  about  equal  quantities  of  labor  always  being  of  equal  value  to  the 
laborer  is  a  figurative  expression  (p.  C9n).  Perhaps,  then,  Adam 
Smith's  use  of  labor-cost  as  the  "real  price"  and  "real  value"  of  things 
was  also  a  figurative  expression.  Adam  Smith,  in  fact,  appears  to  have 
taken  it  from  a  highly  figurative  simile  made  by  Turgot. 


FOLLOWERS    OF   ADAM   SMITH  85 

of  employments,  fifty  or  five  hundred,  the  greater  the 
number  the  better,  exchiding  only  fixed  sahiries,  their 
fault  being  their  fixedness  (pp.  6G-68).     He  even  wants 
profits,  or  commercial  incomes,  to  be  included  (p.  87),  al- 
though he  seems  to  think  they  of  course  follow  the  varia- 
tions of  Avages  (p.  89),  and  so  speaks  of  the  "wages  and 
income-level"  (pp.  77,  91,   103).     Such  a  wages-level 
standard  he  considers  "eternally  just   both    to    debtors' 
and  creditors,"  contending  that  during  a  period  of  prog- 
ress and  cheapening  commodities  the  extra  commodity- 1 
profits  on  the  capital  loaned  by  the  creditors  ought  to  go  I 
to  them,  and  so  let  them  "share  in  the  general  increase | 
of  prosperity   which  their   capital  and  their  inventions] 
have  largely  brought  about"  (pp.  87-91). 

Mj-.  Shadvvell  and  Mr.  Pollard  are  isolated  supporters 
of  the  wages -level  as  the  sole  standard  of  "value,"  in 
anything  like  a  serious  and  earnest  manner.  When  Mr. 
Shadwell  wrote,  he  stood  almost  alone.  When  Mr.  Pol- 
lard wrote,  there  were  few  to  sympathize  with  him. 
But  within  the  last  decade  there  has  grown  up  a  senti- 
ment in  favor  of  their  position,  and  approving  of  a 
monetary  system  which  should  keep  up  the  level  of 
wages  and  let  down  the  level  of  prices.*  The  motive 
for  this  new  turn  is  opposition  to  bimetallism,  and 
anxiety  to  defend  the  single  gold  standard  at  all 
hazards.  The  wages  standard  is  not  very  plainlj'  dis- 
tinct from  the  cost-of-production  standard,  which  had 
already  been  impressed  into  service;  and  so  it  was  but 
natural  for  persons  searching  for  all  possible  arguments 

•Without  this  conclusion  about  the  need  of  a  money  stable  in  the 
"value"  conceived  of,  Henry  George  adopted  the  standard  that  "things 
are  valuable  in  proportion  to  the  amount  of  exertion  which  they  will 
command  in  exchange,"  and  rejected  the  standard  of  cost  of  production, 
Science  of  political  economy,  New  York,  1898,  pp.  249,  253. 


86  HISTORICAL    SURVEY 

to  slip  also  into  the  use  of  this  standard.  As  they  have 
not  so  much  adopted,  as  merely  used,  this  standard,  in 
a  subordinate  manner,  as  an  offset  to  the  commodity 
standard,  and  generally  in  conjunction  with  the  stand- 
ard the  authorities  for  which  will  presentlj'^  call  for  our 
attention,  we  may  reserve  reference  to  their  employment 
of  it  till  the  next  Part. 

§6.  Meanwhile  another  school  of  political  economy 
has  been  forming,  which  can  by  no  means  be  described 
as  composed  of  followers  of  Adam  Smith,  much  less  of 
Malthus,  and  which  also  does  not  advocate  the  wages 
standard,  but  which  would  seem  to  lead  to  the  earnings 
standard,  since  it  seeks  constancy  of  money  in  esteem- 
value,  of  which  the  criterion  seems  to  be  constancy  of 
money-earnings.  This  is  the  Austrian  school.  The 
characteristic  of  this  school  is  the  effort  to  explain  rel- 
ative exchange -values  by  developing  the  theory  of 
esteem -value,  which  it  then  sets  up  as  the  principal  and 
essential  kind  of  value,  as  value  proper.  Consequently 
it  has  a  tendency  to  substitute  this  kind  of  value  as  the 
value  intended  in  the  old  prescription  about  money 
being  stable  in  value.  The  representative  of  this  school 
may  be  sought  in  its  founder,  Carl  Menger,  and  his 
views  on  our  subject  may  be  taken  from  his  article  on 
Money  in  the  Handworterbuch  der  Staatswissenschaften 
(Vol.  III.,  Jena,  1892). 

Professor  Menger  treats  of  exchange-value  proper 
und^r  the  term  "outer  exchange-value,"  to  which  he  op- 
poses what  he  calls  "inner  exchange -value"  or  "inner 
value,"  which  is  easily  seen  to  be  what  is  here  called 
esteem -value.*     He  now  points  out  certain  difficulties  in 


*  To  contrast  exchange-value  and  esteem -value  as  "outer  value  "  and 
"inner  value"  (because  exchange-value  has  reference  always  to  other  or 


FOLLOWERS   OF  BICARDO  87 

measuring  variations  in  exchange -value  proper;  whence 
he^coneludes  that  such  measurement  is  impossible  (pp. 
744-5).  He  even  goes  so  far  as  to  say  that  to  make 
money  stable  in  exchange-value  it  would  be  necessary  to 
make  all  prices  stationary  (p.  749  b),  notwithstanding 
he  had  already  allowed  the  principle  of  compensation  in 
opposite  changes  of  prices,  in  the  case  of  this  kind  of 
value  (p.  748  a-b).  He  then  concludes  that  it  would  be 
better  to  direct  our  efforts  to  the  realizable  object  of  ob- 
taiiiing  a  stable  measure  of  inner  value,  or  esteem -value, 
and  to  seek  to  make  money  stable  in  this  kind  of  value 
(pp.  749-50).  This,  he  thinks,  would  be  a  great  gain, 
as  it  would  then  show  that  all  changes  of  prices  of  goods 
are  changes  due  to  causes  in  them  alone  (p.  750  a). 
This  is  a  weak  argument  for  holding  that  money  ought 
to  be  stable  in  esteem -value. 


CHAPTER   IV 

FOLLOWERS     OF    RICARDO 


§1.  The  principal  followers  of  Ricardo  were  James 
Mill  and  J.  R.  McCulloch.  Both  followed  their  mas- 
ter in  making  the  labor -costs  of  production  not  only  the 
regulator  of  the  relative  values  of  commodities,  but 
also  the  measure  of  their  "  values "  through  the  course 
of  time.     Thus  in  his  Elements  of  Political  Economy, 


outer  things,  while  esteem-value  has  no  such  reference),  is  a  tolerable 
use  of  language.  But  to  call  the  one  "outer  exchange-value"  is  pleo- 
nastic, and  to  call  the  other  "inner  exchange- value "  is  continuing  the 
old  absurdity  of  Adam  Smith,  since  esteem-value  is  not  exchange-value 
at  all. 


88  HISTORICAL    SURVEY 

first  published  in  1821,  and  revised  in  1824,*  James 
Mill,  in  spite  of  his  telling  us  that  "when  we  speak  of 
the  value  of  the  precious  metals,  we  mean  the  quantity 
of  other  things  for  which  it  will  exchange"  (p.  169), 
asserted  that  "the  value  of  commodities  is  determined 
by  the  quantity  of  capital  [=hoarded  labor]  and  labor 
njecessary  to  produce  them,"  and  that  if  a  thing  can  be 
produced  with  half  the  quantity  of  capital  and  labor  as 
before,  its  "value"  falls  by  half  (p.  75),  without  any 
reference  to  what  happens  to  other  things;  and  again, 
that  if  the  material  of  money  were  "always  produced 
under  the  same  circumstances,  that  is,  by  the  same 
quantity  of  immediate,  and  the  same  quantity  of 
hoarded,  labor,  it  would  always  be  an  accurate  measure 
immediately  of  the  value  of  all  commodities  produced 
under  the  same  circumstances"  (p.  109).  Here  is  a 
very  narrow  limitation  of  the  requisites  in  the  standard 
of  value;  but  the  conception  is  of  a  standard,  evidently, 
of  cost -value,  and  whether  it  is  better  or  worse  than 
Ricardo's  wider  conception  of  stability  of  cost-value, 
need  not  concern  us  here. 

§2.  McCulloch  did  not  attempt  to  be  so  precise  in 
these  details,  not  caring  for  the  mode  in  which  the 
labor  is  expended;!  but  he  was  more  precise  in  other  re- 
spects, and  yet  again  more  lax  in  that  he  altered  his 
terminology  from  one  work  to  another.  In  his  Princi- 
ples of  Political  Economy,  Edinburgh,  1825,  he  showed 
originality  by  abandoning  Adam  Smith's  division  of 
"value,"  and  giving  a  new  one.  Leaving  out  use-value, 
he  divided  "  value "  into  "  exchangeable  value "  and 
"real  value"  (p.  211),  and  so  gave  up  the  absurdity  of 


*The  references  are  to  this  second  edition. 
tP.  216  of  the  work  next  referred  to. 


FOLLOWERS    OF  EICaEDO  89 

classing  the  latter  under  the  former.  By  "exchangeable 
value"  he  meant  purchasing  power;  but  continued  the 
ambiguity  of  conceiving  of  this  as  power  over  labor  as 
well  as  over  commodities,  and,  like  Adam  Smith  himself, 
sometimes  spoke  of  it  as  power  to  purchase  commodities 
and  labor  (p.  213),  and  sometimes  as  power  to  purchase 
commodities  or  labor  (pp.  211,  219).  The  measure  or 
standard  of  this  kind  of  value  he  conceived  of  rightly 
up  to  a  certain  point;  for  he  tells  us  that  "no  com- 
modity can  be  constant  or  invariable  in  its  exchange- 
able value,  unless  it  will  at  all  times  exchange  for,  or 
purchase,  the  same  quantity  of  all  other  commodities 
and  of  labor"  (p.  213) .  This  would  be  correct  iJLthe  refer- 
ence to  labor  were  omitted.  It  would  be  correct  also  if 
it  were  not  confined  to  a  meaning  which  does  not  appear 
upon  its  face;  for  he  immediately  adds  that  the  quantity 
of  every  other  class  of  commodities  must  always  be  the 
same  individually,  instead  of  admitting  compensation 
by  substitution  of  more  of  one  chiss  for  less  of  another. 
Apart  from  these  errors,  it  is  plain  that  McCulloch  had 
a  correct  conception  of  stability  of  exchange- value,  cor- 
rectly designated  by  a  term  appropriate  to  it.  But 
now  he  rejects  this  measure  or  standard  for  the  foolish 
reason  that  even  if  we  had  an  article  stable  in  this  way, 
that  is,  stable  in  this  kind  of  value,  it jwould  be  "of  no 
use  whatever,"  because  it  would  leave  us  in  the  dark 
concerning  the  causes  that  may  be  acting  on  it,  and  the 
counterbalancing  causes  acting  on  the  other  things  (p. 
214),*  equally  raising  or  depressing  their  "real  values," 
which  of  course  is  something  else,  of  which  this  stand- 
ard does  not  pretend  to  be  the  measure,  and  which  we 


^Repeated  in  Note  on  Value  in  his  edition  of  Adam  Smith,  ed.  of 
1863,  pp.  439-40. 


90  HISTORICAL    SURVEY 

are  at  liberty  to  ascertain  in  any  other  way  we  find 
proper,*  What  he  wants,  for  any  serious  purpose,  is 
solely  the  measure  and  standard  of  his  second  kind  of 
value,  which  alone  he  regards  as  ^Weal  value."  This  he 
defines  to  be  the  value  of  a  thing  ''in  relation  to  the 
quantity  of  labor  that  has  been  expended  in  its  appro- 
priation or  production,  or  that  would  be  required  for 
that  purpose  at  the  period  when  the  investigation  is 
made"  [^the  cost  of  reproduction]  (p.  211),  The 
measure,  and  standard,  of  this,  then,  of  course,  is  the 
quantity  of  labor  expended  upon  appropriation  or  pro- 
duction. This  labor,  like  Adam  Smith,  he  conceives  as 
the  "price"  which  we  pay  for  things,  and  says  "it  is 
plainly  by  the  magnitude  of  the  price  so  paid,  and  not 
by  the  magnitude  of  the  things  themselves,  that  their 
real  value  is  to  be  estimated"  (p.  217).  And  again, 
slightly  altering  Adam  Smith's  phrase,  he  maintains 
that  the  product,  however  large  or  small,  of  a  given 
amount  of  labor  is  necessarily  of  the  same  "value"  in 
the  estimation  of  the  producer  (p.  218).  He  here 
borders  upon  the  idea  of  esteem -value,  to  which  he  ap- 
proaches on  the  next  page,  where  he  speaks  of  "the  real 
value  of  a  commodity,  or  the  estimation  in  which  it  is 
held  bj^  its  possessor."  Yet  at  the  same  time  he  thinks 
this  is  to  be  measured,  not  by  the  quantity  of  labor  the 
commodity  will  command,  but  "by  the  quantity  of  labor 
required  to  produce  or  obtain  it"  (p.  219). t     Therefore, 


*In  hia  Commercial  dictionary ,  art.  Prices,  ed.  of  1854,  Vol.  II.  p. 
1063,  he  objects  to  Tables  of  prices  that  they  "may  lead  to  the  most  un- 
founded conclusions"  about  the  "cost  or  real  value"  of  commodities.  He 
thinks,  however,  a  table  of  prices  and  wages  is  valuable  as  showing  the 
people's  command  over  the  necessaries  and  conveniences  of  life. 

♦Here  he  laid  himself  open  to  attack  by  those  who  held  "real  value" 
to  be  esteem-value,  advantage   of  which  was  fully  taken  by  Malthus  in 


FOLLOWERS   OF  RICARDO  91 

like  Ricardo,  he  propounds  that  "if  any  commodity  re- 
quired at  all  times  the  same  quantity  of  labor,  or  of  toil 
and  trouble,  for  its  production,  it  would  be  invariable  in 
its  real  value"  (p.  220).  So  much  for  his  earliest  work. 
McCuUoch's  later  works  retain  nearly  the  same  ideas, 
but  alter  the  phraseology,  and  so  introduce  confusion. 
In  his  Note  on  Value  appended  to  his  edition  of  the 
Wealth  of  Nations,  he  asserts  that  the  terra  "value" 
should  be  used  only  in  the  sense  of  "exchangeable 
value"  (p.  438b),  still  retained  in  the  sense  of  the 
power  of  purchasing  both  commodities  and  (or  or)  labor 
(p.  439a  and  b);  and  the  division  which  he  before 
made  of  "value"  into  "exchangeable  value"  and  "real 
value"  he  now  treats  as  a  division  between  "value"  and 
"cost"  (p.  439a).  Therefore  what  he  before  gave  as 
the  measure  or  standard  of  "exchangeable  value"  he 
now  repeats  merely  as  the  measure  or  standard  of 
"value"  (p.  439b);  and  what  he  before  said  about  a 
commodity  being  invariable  in  "real  value"  if  it  were 
always  produced  by  the  same  amount  of  labor,  he  now 
predicates  of  it  as  referring  merely  to  "cost "  (p.  442  a)  .* 
Yet  he  also  admits  the  former  phraseology,  once  speak- 
ing of  "the  cost,  or  as  it  has  been  sometimes  termed,  the 
real  value  of  all  things"  (p.  441a),  and,  again  dropping 
the  epithet,  uses  "value"  as  synonymous  with  "cost." 
For  he  reiterates  what  he  had  before  said  about  the 
product,  no  matter  its  quantity,  of  the  same  labor 
always  being  of  the  same  "value"  to  the  producers,  and 
reaffirms  the  conclusion  that  the  "value"  of  things  is  to 
be  estimated  by  the  price  in  labor  they  have  cost  (p. 

his  Definitions  in  political  economy.     MpCulloch  seems  afterwards  to 
have  avoided  repeating  the  above  expression. 

•Compare  also  Principles,  p.  219,  with  the  Note,  pp.  441b  and  443-4. 


92  HISTORICAL    SURVEY 

441  b) ;  and  even  goes  so  far  as  to  say  that  he  has  been 
tracing  "all  permanent  variations  in  the  value  of  com- 
modities not  subject  to  any  species  of  monopoly,  to 
variations  in  the  amount  of  labor  required  for  their  pro- 
duction" (pp.  443  a-b).  Thus  after  distinguishing 
"value"  from  "cost,"  and  saying  that  "value"  should 
only  be  used  in  the  sense  of  "exchangeable  value,"  and 
so  defining  it,  he  reverts  to  using  it  in  the  sense  of 
"cost,"  and  to  using  the  expression  "real  value"  only  in 
this  sense.  In  1858  he  published  an  article  on  Money  in 
the  eighth  edition  of  the  Encyclopeedia  Britanniea, 
which  was  republished  in  1859  in  the  second  edition  of 
his  Treatises  and  Essays.  Here  he  again  mentions  the 
supposition  of  a  commodity  always  produced  by  the 
same  quantity  of  labor,  and  now  says  simply  that  "its 
value  would  be  invariable"  (p.  15).  But  this  occurs 
under  a  heading  in  which  the  phrase  "the  exchangeable 
value  of  money"  is  used.  Consequently,  when  in 
another  part  of  this  work  he  speaks  of  "invariability  in 
value"  as  "the  great  desideratum  in  a  currency"  (p. 
73),  his  meaning  is  not  quite  plain.  The  sequel  seems 
to  show  that  he  meant  by  it  merely  the  maintenance  of 
the  intrinsic  value  of  metallic  currency.  But  he  had 
before  placed  "steadiness  of  value  "  among  the  reasons 
for  adopting  gold  and  silver  themselves  for  money  (pp. 
5-6),  and  again  had  nj)ticed  the  injury  to  contractants 
arising  from  a  variation  in  the  "value"  of  money  not 
only  in  the  case  of  a  tampering  with  the  currency,  but 
in  the  ease  of  a  variation  in  "the  cost  of  gold  and 
silver"  (pp.  55-6).  Here,  then,  the  desire  is  for  invari- 
ability in  what  he  always  viewed  as  "real  value."  Yet 
again  in  the  Note  on  Money,  in  his  edition  of  the 
Wealth    of  Nations,    he    once    speaks,    in    connection 


FOLLOWERS   OF  RICABDO  93 

with  contracts,  of  the  fall  in  "value"  of  money  which 
took  place  after  the  discovery  of  America,  "as  compared 
with  the  mass  of  commodities"  (p.  484 a-b),  seemingly 
referring  to  a  fall  in  exchange-value  as  something  worth 
measuring  and  as  something  undesirable  in  money.* 
But  perhaps  he  cited  this  case  in  this  way  because  it 
was  not  only  a  fall  in  the  cost -value  of  money,  but  so 
great  a  fall  in  this  value  as  to  outstrip  the  falls  in  the 
cost-values  of  commodities  and  to  become  a  fall  of 
money  also  in  exchange -value,  wherefore  it  could  doubly 
serve  as  a  bad  example  of  variation  in  "value."  That  it 
was  really  stability  in  cost-value  which  he  desired,  and 
not  merely  in  exchange-value,  which  would  admit  a  fall 
in~the  cost -value  of  money  if  only  not  greater  than  the 
average  of  the  falls  in  cost -value  of  commodities  in 
general,  is  evident  from  another  passage  in  this  Note 
(p.  498  b),  and  from  similar  passages  in  other  works 
written  during  the  period  of  falling  prices  prior  to  the 
middle  of  the  century. t  These  are  passages  which  de- 
fend the  metallic  standard  since  its  restoration  in 
England  by  the  Act  of  1819.  He  admits  to  its  opponents 
that  the  prices  of  most  articles  had  fallen,  whence  they 
had  concluded  that  the  "value"  of  money  had  risen. 
This  conclusion  he  will  not  accept,  on  the  ground  that 
the  prices  had  fallen  because  of  improved  production  in 
each  and  all  of  the  articles  in  question.  Thus  while  his 
opponents  were  contending  that  the  exchange -value  of 


*And  in  his  Commercial  dictionary,  ed.  of  1854,  art.  Money,  he  uses 
"comparative  steadiness  of  value"  as  a  requisite  in  money  in  the  sense 
of  steadiness  (or  at  least  of  liability  not  to  fall)  in  purchasing  power, 
Vol.  II.  p.  865. 

f Statistical  account  of  the  British  Empire,  London,  1839,  Vol.  II.  p. 
30;  Commercial  dictionary,  arts.  Bank  of  England,  and  Prices,  (retained 
in  the  ed.  of  1854,  Vol.  I.  pp.  79-80,  and  Vol.  II.  p.  1057). 


94  HISTORICAL    SURVEY 

money  had  risen  and  that  this  rise  was  a  bad  thing,  he 
would  not  accept  either  of  these  conclusions  because  it 
was  not  proved  that  the  cost -value  of  money  had  risen, 
and  it  was  the  cost -value  of  money  which  alone  he 
would  take  for  the  norm  of  what  simply  the  "value  "  of 
money  ought  to  be.  This  position  is  also  in  perfect  ac- 
cord with  a  passage  in  his  earliest  work,  the  Principles 
(p.  258),  written  before  the  general  fall  of  prices  had 
fairly  set  in,  in  which  he  distinguished  between  a  fall  in 
the  price  of  an  article  due  to  its  own  improved  produc- 
tion, and  a  fall  in  its  price  not  due  to  such  an  improve- 
ment (and  cousequently,  if  permanent,  due  to  a  rise  in 
the  "real  value"  of  money),  asserting  that  while  in  the 
latter  case  "a  part  of  the  wealth  of  the  producers"  is 
"gratuitously  transferred  to  the  consumers,"  the  former 
is  "not  disadvantageous  to  the  producers."  Thus  Avhat 
McCuUoch  wanted  was  what  Ricardo  had  wanted,  a 
money  stable  in  cost-value,  which,  in  a  period  of 
progress,  would  let  prices  fall.  And  yet  after  the  dis- 
covery of  the  Californian  and  Australian  gold  mines, 
when  the  general  downward  tendency  of  prices  had  been 
arrested,  and  there  was  fear  even  of  a  rise  of  prices, 
some  asserting  that  it  had  already  set  in,  which  would 
mean  a  fall  of  gold  and  silver  in  exchange -value  as  well 
as  in  cost-value,  McCuUoch  still  defended  the  gold 
standard.  He  now  maintained  that  "no  sufficient  evi- 
dence has  yet  been,  or  we  believe,  can  be  produced,  to 
show  that  the  value  of  gold  has  fallen,  or  that  prices 
have  risen"*  —  in  which  passage  he  could  certainly  mean 
by  "value"  only  the  exchange- value  of  gold,  and  was 
defending  the  gold  standard  for  its  steadiness  in  ex- 
change-value.    He   even   went   so   far   as  to   say   that 

*Foot-note  to  his  1803  edition  of  the  Wealth  of  nations,  p.  96  b, 


FOLLOWERS    OF  RICARDO  95 

"if  the  precious  metals  should  fall  in  value,"  since  the 
prosperity  of  the  industrial  classes  is  "uniformly  held  to 
be  identical  with  that  of  the  community,"  "such  fall 
will  be  publicly  advantageous."*  He  here  shows  that 
his  practical  interest  in  wishing  the  currency  of  his 
country  not  to  be  disturbed  rose  above  his  theoretical 
interest  in  the  fundamental  principle  of  monetary 
science.  It  can  hardly  be  inferred  that  his  real 
theoretical  opinion  was  altered. 

§3.  Beyond  his  two  faithful  disciples,  one  of  whom 
even  denied  him  in  the  last  hour,  Ricardo's  influence  is 
found  principally  in  a  general  trend  of  economic 
thought,  by  no  means  consistent  with  itself;  and  there 
are  not  many  instances  to  cite  of  strict  devotion  to  his 
one  idea.  Even  using  the  greatest  care  to  select  only 
those  economists  who  maintain  his  doctrine  consistently, 
we  must  admit  some  who,  like  McCulloch,  occasionally 
swerve,  or  who  fall  into  the  same  sort  of  confusion 
which  Ricardo  himself  manifested.  One  or  two,  how- 
ever, may  be  found  who  do  not  deviate,  because,  like 
James  Mill,  they  treat  the  subject  only  casually,  and  a 
few  more  who  are  thoroughly  concordant. 

In  Capital,  Currencij,  and  Banking,  London,  1847, 
James  Wilson,  instead  of  saying  that  a  material  should 
be  chosen  for  money  which  is  stablest  in  "value,"  and 
then  using  "value"  in  a  sense  indicating  cost-value,  cut 
the  matter  short  by  simply  saying  that  "in  fixing  upon 
any  one  commodity,  as  the  common  standard  in  relation 
to  which  the  value  of  all  others  should  be  expressed  and 
determined,  for  obvious  reasons  it  was  desirable  to  select 


*rbid.  p.  97a-b.  Similarly  the  article  in  the  Treatises,  p.  49,  and 
art.  Money  in  Commercial  dictionary,  1854,  Vol.  II.  p.  866.  He  also 
refers  to  two  others  of  his  recent  writings. 


96  HISTORICAL    SURVEY 

that  which  varied  least  in  its  cost  of  production "  (p. 
5).*  Equal  closeness  to  the  original  is  also  to  be  found 
even  later,  in  the  writings  of  Bonamy  Price.  This 
uncompromising  author  asserted:  "A  sale  for  money  is 
an  exchange  of  two  equal  costs  of  production,  omitting 
rarity  and  other  exceptional  circumstances.  .  .  . 
Gold  and  silver  have  been  preferred  [to  serve  as  cur- 
rency] on  account  of  their  convenience,  and  of  their  cost 
of  production  being  supposed  to  be  little  liable  to  fluctu- 
ation; "t  and  declared  it  to  be  desirable  that  while  all 
other  articles  should  be  cheapened  and  their  prices  fall, 
the  money -material  should  not  "become  cheaper,  and 
its  cost  of  production  less. "J 

In  America  an  early  economist  and  moralist,  Francis 
Wayland,  in  his  Elements  of  Political  Econcmy,  New 
York,  1837,  showed  close  adhesion  to  the  form  as  well 
as  to  the  spirit  of  Ricardo's  teaching.  Dividing  "value" 
into  "intrinsic  value,"  or  "the  power  which  any  partieu- 


*Cf.  also  pp.  13i  and  212,  where  the  roundabout  course  was  followed. 
In  both  these  passages  he  used  "intrinsic  value  "as  cost-value  (where 
Ricardo  and  others  used  "real  value").  But  on  p.  14  he  used  it  as  ex- 
change-value; and  here  it  is  fluctuation  in  exchange-value  that  is  treated 
as  an  evil  — but  only  a  fall  in  exchange-value  that  would  also  be  a  fall  in 
cost-value.  On  page  212  also  there  is  added  another  requirement  in 
the  standard,  namely  invariable  (i-elative)  supply  and  demand;  which 
makes  it  a  standard  either  of  exchange-value  or  of  esteem-value. 

f Principles  of  currency,  London,  1809,  pp.  66-7. 

ifbid.  pp.  52-3,  and  similarly  Currency  and  banking,  liondon, 
1876,  p.  27.  The  only  reason  assigned  is  the  trivial  one  that  the 
money-pieces  of  the  same  value  would  become  heavier.  This  reason 
does  not  apply  against  a  rise  in  even  the  cost-value  of  money.  In 
an  article  in  the  North  American  Review,  Dec.  1879,  he  denied  that 
labor  can  be  a  measure  of  value,  because  its  value  varies  at  different 
times  and  places,  p.  575.  Here  he  divides  value  into  two  kinds: 
primarily  "the  feeling  of  esteem,"  and  secondarily  "market  value"  or 
"the  quantity  of  other  things  which  the  thing  can  procure  for  its 
owner,"  pp.  574-5. 


FOLLOWERS    OF  RICABDO  97 

lar  substance  possesses,  of  gratifying  human  desire," 
which  is  use -value  decked  in  a  terra  long  ago  appropri- 
ated to  something  else,  but  in  this  sense  probably  bor- 
rowed from  Locke,  and  "exchangeable  value,"  or  "the 
power  of  procuring  for  us  something  else  in  exchange  " 
(pp.  4-6),  and  confining  his  attention  principally  to  the 
latter,  he  wanted  money  to  be  constant  in  "value  "  "in 
proportion  to  other  values"  (p.  215),  that  is,  in  ex- 
change-value proper.  But  he  held  the  Ricardian  cost- 
of- production  theory  explanatory  of  relative  exchange- 
values  (pp.  8,  179),  and  extended  this  into  a  measure 
of  "value"  and  even  of  the  "exchangeable  value"  of  a 
single  commodity  through  the  course  of  time.  Thus  he 
says  that  "if  the  cost  of  the  precious  metals  changes, 
their  exchangeable  value  varies,  like  that  of  any  other 
product"  (p.  222),  without  reference  to  what  is  going 
on  in  the  other  products.  Consequently  he  laid  it  down 
as  one  of  the  first  requirements  in  the  material  to  be 
selected  as  money,  that  "its  cost,  or,  in  other  words,  the 
amount  of  labor  necessary  to  its  production,  must  be  as 
invariable  as  possible"  (p.  216).* 

Similar  views  have  been  held  by  a  later  American 
writer  on  economics.     In  his  First  Principles  of  Political 

*Wayland,  however,  elsewhere  showed  perfect  acquaintance  with  the 
balancing  of  the  cost  of  production  of  the  money  materials  with  the  cost 
of  production  of  commodities,  and  the  effect  of  this  upon  the  course  of 
prices,  pp.  222-3,  237-8.  Yet  he  made  no  use  of  it  to  recommend  such  a 
parallelism  as  would  keep  prices  steady,  which  he  ought  to  have  done  if 
he  wanted  money  to  be  stable  in  exchange-value  proper,  nor  again  to 
recommend  a  fall  of  prices  to  agree  with  progress  in  improving  the  pro- 
duction of  commodities,  as  he  ought  to  have  done  if  he  wanted  money  to 
be  stable  in  cost-value.  But  we  have  his  word  for  the  latter  desire. 
Perhaps  he  did  not  express  it  in  connection  with  prices  because  of  a  feel- 
ing that  this  would  jar  with  his  definition  of  "exchangeable  value."— The 
Ricardian  element  in  Wayland's  work  is  retained  in  A.  L.  Chapin's 
Becast  of  it,  New  York,  1883,  pp.  293,  294. 

G 


98  HISTORICAL    SURVEY 

Economy,  Philadelphia,  1875,  W.  D.  Wilson  maintained 
the  doctrine  that  the  value  of  an  article  depends  "upon 
the  average  cost  (labor)  of  reproduction"  (p.  254);  and 
because  he  looked  upon  not  merely  labor  but  strength  as 
a  constant  quantity,  saying  that  average  strength  is 
nearly  the  same  from  age  to  age  (p.  255),  he  concluded 
that  "a  constant  standard  of  value"  would  be  found  in 
a  commodity  which  is  a  constant  product  of  the  con- 
stants, average  strength  X  time  (p.  256). 

Perhaps  the  most  extreme  follower  of  Ricardo,  in  the 
matter  before  us,  is  to  be  found  in  Spain.  In  his 
Tratado  didactico  de  Economia  politica,  also  entitled 
Filosofia  del  Interes  personal,  Madrid,  1865,  Mariano 
Carreras  confined  the  term  "value"  to  the  meaning  of 
cost -value,  regulating  it  entirely  by  the  cost  of  produc- 
tion of  the  article  (pp.  136-7,  163,  168,  202,  260,  324), 
and  using  for  exchange -value  the  term  "price"  ex- 
tended to  the  relation  between  anything  and  everything 
else  (pp.  122,  229,262-5,  cf.  266-7).  He  therefore 
wanted  money  to  be  stable,  not  in  "price"  (exchange- 
value),  but  in  "value"  (cost -value),  that  is,  in  cost  of 
production  (see  p.  329),  and  recommended  gold  as 
better  than  silver  for  money  not  only  because  it  is 
more  mobile  and  elastic  so  that  there  is  a  more  quickly 
restored  equilibrium  in  its  "price"  (exchange -value) 
over  the  world,  but  because  in  the  course  of  time  there 
is  less  variation  in  the  cost  of  its  production,  since  its 
mines  lie  on  the  surface  and  are  exploited  always  with 
about  the  same  amount  of  labor,  whereas  the  production 
of  silver  admits  of  the  application  of  machinery  and  of 
improved  processes,  which  lower  its  cost  of  produc- 
tion and  consequently  its  value  (p.  330,  cf.  pp.  342-3). 
The  ideal  he  considered  to  be  a  "measure  of  prices," 


FOLLOWERS    OF  RICARDO  99 

and  he  followed  Roscher  in  requiring  in  it  (1)  stability 
of  utility,  and  (2)  stability  of  cost  of  production;  for 
he  viewed  it  as  a  measure  which  would  show  that  all 
changes  of  the  prices  of  goods  are  changes  of  their 
"value"  (cost-value),  and  are  not  due  to  any  change 
in  the  "value"  (cost-value)  of  the  measure  itself  (pp. 
243-4),  For  long  periods,  he  thought  wheat  the  best 
measure  of  this  kind  (pp.  344-5), 

In  France  a  fairly  strict  Ricardian,  in  our  subject, 
was  Michel  Chevalier.  In  the  elaborate  treatise  on 
Money  .which  forms  the  third  volume  of  his  Cours  d' 
Economie  politique,  the  second  and  revised  edition  of 
which  appeared  in  1866,  Chevalier,  although  rejecting 
the  labor  standard  and  the  wheat  standard  as  absolute 
standards  of  value  (pp.  97-117),  yet  spoke  of  gold  and 
silver,  like  other  things,  as  falling  in  value  because 
their  production  is  improving  (pp.  92-3),  and  treated 
labor  and  wheat  as  more  stable  over  long  periods  than 
anything  else,  because  the  labor  of  the  lowest  laborers 
remains  about  of  the  same  productivity,  and  wheat  is 
produced  with  less  variation  of  labor -cost, —  in  other 
words,  because  in  the  lowest  labor  there  has  been  little 
improvement  in  skill,  and  in  wheat-raising  there  has 
been  little  improvement  in  the  methods  of  production 
(pp,  118,  120-2),'^  Then,  hypothetically,  he  supposed 
that  the  value  of  money  would  remain  stationary  if  its 
cost  of  production  were  constant  (p.  725)  ;t  and  as  he 


•This  wheat  standard  coincides  with  this  labor  standard.  The  con- 
finement of  the  labor  standard  to  labor  whose  product  is  stationary  is 
peculiar,  and  seems  to  have  been  taken  from  Bastiat,  in  whom  we  shall 
presently  see  a  similar  opinion. 

tFor  this  reason,  before  the  Califomian  discoveries,  he  had  thought 
gold  more  stable  in  value  than  silver,  Les  mines  d'or  et  d'argent  du 
nouvmu-tnonde,  Revue  des  deux  Mondes,  ler  avril  1847,  p.  46;  and  even 


100  HISTORICAL    SURVEY 

held  that  progress  consists  in  the  improvement  in  the 
production  of  other  commodities,  this  would  lead  to  a 
general  fall  of  prices  (p.  727),  which,  therefore,  he 
thought  to  be  desirable,  and  also  to  be  consistent  with, 
and  really  caused  by,  the  stability  in  "value"  of  money. 
His  conception,  and  his  doctrine,  were  evidently  that 
money  should  be  stable  in  cost -value,  and  not  in  ex- 
change-value. The  measurement  of  the  purchasing 
power  of  money,  as  attempted,  for  instance,  by  Leber, 
he  mentions  merely  as  something  curious  and  interest- 
ing (p.  125).* 

Lately,  in  Italy,  Professor  A.  Loria  has  shown  himself 
almost  as  strict  a  follower  of  Ricardo  as  Carreras.  In 
his  Studii  sulValore  della  Moneta,  Turin,  1891,  he  opened 
with  a  violent  attack  upon  the  quantity  theory,  and  de- 
fense of  the  cost  theory,  of  the  value  of  money.  In  a 
recent  article  in  the  Reveu  d'Economie  politique,  Feb- 
ruary 1902,  entitled  Des  MetJwdes  proposees  pour  regii- 
lariser  la  \aleur  de  la  Monnaie,  he  shows  entire  absorp- 
tion in  the  conception  of  "value  "  as  cost- value.  Value, 
he  dogmatically  asserts,  varies  as  cost  of  production 
(p.  109),  and  all  goods  can  rise  or  fall  together  in 
"value,"  because  of  inherent  changes  in  them,  that  is, 
in  their  costs  of  production  (p.  Ill) ;  which  is  true 
enough  of  "value"  in  the  sense  used  by  him.  With 
equal  unreserve  he  therefore  asserts  that  "value"  must 

in  1854,  art.  Monnaie  in  the  Dictionnalre  de  I'Econoraie  politique,  Vol. 
II.  pp.  205-6. 

*Yet  in  one  passage  in  La  hnisse  probable  de  Vor,  1859,  he  identi- 
fied the  probable  fall  in  the  value  of  money  with  a  rise  of  prices,  saying 
even  that  they  are  not  merely  connected  facts,  but  form  one  fact,  as  the 
two  sides  of  the  same  truth,  p.  12:5.  Still,  in  this  work,  p.  20,  he  showed 
the  same  idea  as  above,  saying  that  the  thing  stable  in  value  would  vary 
in  relation  to  commodities,  because  of  changes  in  them,  not  of  changes 
in  itself. 


FOLLOWERS    OF   RICARDO  101 

be  measured  by  variations  in  the  cost  of  production  of 
the  article  in  question  (p.  Ill),  itself  to  be  measured 
directly — at  the  least  fertile  source  (p,  116).  And  he 
finds  it  strange  that  economists  should  have  attempted 
to  measure  the  cost  of  production,  or  value  (in  this 
sense),  of  money  by  averaging  variations  of  prices 
{ihid. ) ;  which  of  course  no  economist  ever  yet  attempted 
to  do,  the  averaging  of  prices  being  intended  for  another 
purpose.  Therefore,  as  a  substitute  for  the  scheme  of 
regulating  paper  money  so  as  always  to  be  convertible 
in  an  equal  quantity  of  commodities  in  general,  or  in  a 
variable  amount  of  metallic  money  so  convertible,  he 
offers  as  the  proper  way  of  making  money  invariable  in 
"value"  that  paper  money  should  be  redeemable  in  an 
amount  of  metallic  money  inversely  according  to  the  cost 
of  its  production  or  importation  {ibid.),  or  convertible  in 
goods  produced  by  a  fixed  quantity  of  labor  (p.  124). 

§  1.    Few  other  economists  can  be  found  who  have 
maintained  Ricardo's  doctrine  in  all  its  purity.*     But  of 


*It  is  well  known  that  the  doctrine  about  value  depending  upon 
labor  has  pleased  the  socialists.  Thus  it  was  adopted  by  Karl  Marx,  who 
concluded  that  "the  value  of  a  commodity  would  therefore  remain  con- 
stant if  the  labor-time  required  for  its  production  also  remained  con- 
stant," p.  7  of  the  English  translation  of  Capital  (18G7),  London,  1887, 
Vol.  I.  He  used  the  terra  "value"  (=cost-value)  as  distinct  both  from 
"use-value"  and  "exchange-value,"  pp.  3-5,  treating  the  latter  merely  as 
a  "form  of  value,"  p.  14,  cf.  p.  3  (of.  Rossi,  below).  Therefore  he  held, 
not  only  that  a  general  fall  of  the  "values  "  of  all  commodities  could  take 
place,  and  that  this  would  mean  constancy  of  their  "relative  values" 
(=exchange-values),  p.  23,  but  that  there  could  be  a  general  fall  of 
prices,  resulting  from  improvements  in  the  production  of  commodities, 
while  money  remained  constant  in  "value  "  (there  being  no  improvement 
in  the  production  of  its  material),  p.  71.  But  Marx  does  not  call  for 
notice  in  the  body  of  this  work,  because  he  did  not  attach  importance  to 
money  being  stable  in  "value,"  on  the  ground  that  prices  adjust  them- 
selves, pp.  70-71,  and  saw  no  defect  in  a  change  of  price  not  marking 
the  change  of  value,  p.  75. 


102  HISTORICAL    SURVEY 

late  years,  as  already  noticed  at  the  end  of  the  preceding 
line  of  descent,  there  has  been  a  tendency  to  make  use 
of  his  principle  for  a  particular  practical  purpose. 
Little  scrupulosity,  however,  has  been  shown,  and  the 
doctrines  of  Ricardo  and  Adam  Smith  have  been  so 
much  mixed  with  each  other  and  with  others,  that  we 
must  postpone  mentioning  most  of  the  revivalists  until 
the  next  Part,  where  they  may  be  treated  together  in 
the  broad  class  of  advocates  of  the  labor  standard.  But 
there  is  one  among  the  opponents  of  bimetallism,  who 
has  nearly  confined  himself  to  Ricardo' s  position.  It 
may  be  interesting,  then,  to  review  his  opinions  here. 

The  author  of  one  of  the  best  of  the  many  ephemeral 
writings  called  forth  in  reply  to  "Coin's  Financial 
School,"  Edward  Wisner,  in  Cash  vs.  Com,  Chicago, 
1895,  asserts  that  "nothing  but  human  labor  can  create 
value"  (p.  54),  and  "the  value  of  any  commodity  rests 
upon  its  utility  and  is  controlled  by  the  amount  of  labor 
it  takes  to  produce  it "  (p.  55,  or  to  reproduce  it,  pp. 
38,  40).  This  Ricardian  measure  of  relative  values  is 
now,  without  Ricardo's  flinching,  applied  to  the  value 
of  a  single  thing  through  the  course  of  time.  Labor  is 
declared  to  be  the  measure  of  value  (p.  31);  and  it  is 
maintained  that  "a  money  unit  should  represent  as 
nearly  as  possible,  continuously,  a  given  amount  of 
human  labor  or  effort"  (p.  39).  Gold  is  praised  for 
doing  this  most  nearly,  although  it  has  the  demerit  of 
having  declined  in  value  somewhat  of  late  (pp.  40,  95). 
For  a  day's  labor  will  now  buy  more  of  almost  every- 
thing, including  gold,  than  it  would  forty  years  ago 
(p.  33),  and  less  labor  is  required  to  produce  not  only 
a  bushel  of  wheat,  but  a  dollar's  worth  of  wheat,  so 
that  all  things  are  cheaper  now  (pp.  35,  90).     If,  how- 


FOLLOWERS    OF  BICABDO  103 

ever,  prices  had  been  kept  up  "temporarily" — there  is 
no  reason  for  this  restriction — by  cheapening  money 
equally  with  commodities,  this  would  not  have  been 
desirable,  "even  to  avoid  a  panic,"  since  a  continuation 
of  this  process  "would  produce  a  much  worse  panic  than 
we  now  have"  (p.  39), —  the  reason  for  which  pre- 
sumably is  that  money  would  not  then  be  properly  ful- 
filling its  function  as  the  standard  of  "value."  Satis- 
faction is  also  shown  at  the  thought  that  the  last  half 
of  our  national  debt  will  be  paid  off  with  more  property, 
"of  course,"  but  with  less  labor,  than  the  first  half 
(p.  60).  Mr.  Wisner  holds,  as  everybody  would,  that 
"when  compared  with  human  labor,  things  can  never 
get  too  cheap,"*  and  that  "the  only  way  the  human 
family  can  be  benefited  by  the  triumphs  of  science  and 
art  is  by  a  decreased  cost  of  the  things  it  needs" 
(p.  42) ;  but  he  takes  prices  as  synonymous  with  costs, t 
and  further  conceives  that  "as  prices,  compared  with 
human  labor,  decline,  the  condition  of  the  people  is 
elevated,"  and  that  this  is  "the  process  of  natural  law 
and  a  phase  of  evolution,"  against  which  it  is  useless 
for  bimetallists  to  contend  by  trying  to  keep  prices  up 
(p.  66,  cf.  pp.  86-7). t  It  is  evident  that  Mr.  Wisner 
is  dealing  with  cost -value,  except  where  he  once  men- 
tions the  command  of  labor  over  commodities  and 
money,  when  he  strays  momentarily  into  the  field 
of  esteem -value. 

§  5.    Putting  off  notice  of  the  rank  and  file  of  con- 
troversialists who  have  indifferently  used  either  or  both 


*He  has,  however,  excepted  gold. 

tYet  he  distinguishes  between  values  and  prices  on  p.  76. 
ISuch  a  "process  of  natural  law"  would  be  observed  if  prices  were 
■table  and  wages  and  profits  rose;  but  this  is  not  noticed. 


104  HISTORICAL    SURVEY 

of  the  standards  based  on  labor,  we  may,  before  leaving 
this  subject,  mention  one  of  the  great  economists  who 
has  been  confused  between  the  two.  We  shall  presently 
find  many  of  the  foremost  modern  economists  equally 
confused  between  these  two,  but  adding  confusion  by 
admitting  also  the  commodity  standard.  This  one  eon- 
fused  economist,  at  least,  has  nearly  avoided  the  last 
incongruous  element,  and,  almost  entirely  confining 
himself  to  the  labor  standard,  has  failed  principally  in 
not  distinguishing  between  its  two  forms. 

Bastiat,  in  his  Harmonies  economiques  published  after 
his  death,  in  1850,*  treating  "value  "  as  service  (p.  160), 
and  the  value  of  a  thing  as  an  "incorporated  service" 
(p.  184),  but  also  calling  it  a  "relation"  (pp.  162,  241, 
253),  regarded  a  measure  of  value  as  a  measure  of  "the 
relation  of  effort  to  satisfaction,"  and  concluded,  rather 
strangely,  that  this  measure  can  only  be  the  effort  itself, 
or  labor  (p.  174).  Hereupon  he  conceived  that  the 
value  of  things  is  to  be  measured  by  (the  inverse  of) 
the  quantity  of  them  acquired  in  a  given  time  by 
laborers  who  perform  the  lowest  kind  of  labor,  merely 
muscular  and  unaided,  "raw  labor"  {le  travail  brut), 
which  he  took  to  be  "identical  with  itself  at  all  times 
and  places"  (p.  175,  ef.  p.  243).  This,  applied  to 
money,  would  be  a  measure  of  its  value  by  the  wages 
only  of  the  lowest  labor,  and  so  would  be  a  measure, 
mangled  by  this  confinement,  of  esteem -value.  But 
elsewhere  he  spoke  of  the  "value"  of  all  things  falling 
with   improved   production, t  and   viewed   this    as   the 


*And  as  Vol.  VI.  in  his  Oenvres  completes,  Paris,  1855,  to  which  the 
references  are  made. 

tin  which  case  he  recognized  that  the  "relative  values"  {i.e.  ex- 
change-values) may  be  constant,  p.  349. 


CONFUSED    ECONOMISTS  105 

inevitable  and  beneficent  tendency  of  progress  (pp. 
182-4,  247,  261).  And  he  said  this  also  of  "prices" 
(p.  199),  which  would  mean  that  he  supposed  (and 
wanted)*  money  to  be  stable  in  cost -value. 


CHAPTER  V 


ECONOMISTS  CONFUSED  BETWEEN  A  LABOR -VALUE  AND 
EXCHANGE - VALUE 

§1.  The  greatest  among  the  early  French  econ- 
omists of  the  nineteenth  century  was  J.  B.  Say:  and 
yet  he  was  so  confused  on  the  subject  before  us  that  it 
is^  impossible  to  tell  what  his  real  opinion  was.  Say 
rightly  modified  Ricardo's  cost -of -production -at- the- 
poorest- source  theory  of  relative  values  by  pointing  out 
that  the  degree  of  poorness  in  the  sources  which  will  be 
worked  is  itself  affected  by  the  value  of  the  article 
already  determined  by  its  supply  and  demand;!  but  at 

♦Little  evidence,  however,  is  elsewhere  given  by  Bastiat  that  he 
was  clear  to  himself  how  he  wanted  money  to  behave.  In  Maudit  argent, 
Vol.  V.  p.  88,  he  denied  that  money  is  a  measure  of  value;  but  he  seems 
to  refer  merely  to  actual  money,  and  to  its  not  being  a  good  measure, 
because  of  its  fluctuations.  His  idea  of  a  piece  of  money  as  a  bill  of 
exchange  upon  society  entitling  its  bearer  to  the  payment  at  any  time  he 
demands  it  of  a  service  equal  to  the  service  he  rendered  when  he  took 
it.  Vol.  V.  pp.  80-1,  VI.  p.  209,  implies  that  money  ought  to  be  stable 
in  value,  but  might  involve  the  commodity  standard  as  well  as,  if  not 
better  than,  the  labor  standard.  In  Vol.  V.  pp.  89-90  he  speaks  of  the 
"depreciation"  of  paper  money  as  manifesting  itself  by  the  nominal  rise 
of  prices,  and  complains  that  the  laborers  suffer  because  their  wages  do 
not  rise  till  some  time  after.  This  is  use  of  the  commodity  standard, 
and  express  denial  of  the  labor  standard. 

fTraiti  d'iconomie  politique,  Paris,  5th  ed.  1826  (the  first  was  in 
1803),  Vol.  I.  p.  69,  Vol.  II.  pp.  35,  171-2,  Cotirs  complet  d'iconomie 
politique  pratique,  Brussels,  2d  ed.  1840,  p.  187b  (the  first  was  in  1828-9). 


106  HISTORICAL    SURVEY 

the  same  time  he  positively  said  that  "the  price  of  a 
thing  in  silver  depends  upon  the  relation  found  between 
the  cost  of  production  of  silver  and  that  of  the  thing" 
{Tr.  II.  p.  195).  And  although  he  despaired  of  any 
good  measure  of  value,  yet  he  held  that  the  best  we 
have  is  wheat,  asserting  that  through  the  course  of  ages 
this  has  varied  in  value  least  for  two  reasons.  The  one 
reason  is  that  the  methods  of  producing  it  have  been 
always  at  about  the  same  stage  of  development,  so  that 
its  cost  of  production  has  always  been  nearly  the  same 
over  long  periods.  The  other  is  that  the  demand  for  it 
has  always  extended  in  about  the  same  proportion,  over 
long  periods,  with  the  extension  of  its  production,  so 
that  the  relation  between  its  demand  and  supply  has 
been  nearly  constant.*  Of  these  two,  he  apparently 
attached  more  importance  to  the  first,  as  he  recurs  to  it 
alone  ( Tr.  II.  pp.  196,  208) ,  and  tells  us  that  through  the 
course  of  time  the  "value"  of  money  varies  according 
to  the  cost  of  its  production,  without  regard  to  the  total 
quantity  produced  {Tr.  II.  p.  209),  or  that  its  variation 
may  be  determined  by  its  variation  in  comparison  with 
things  which  are  stable  in  the  cost  of  their  production 
{C.  pp.  186-187). t  Such  a  variation  he  either  men- 
tions as  a  variation  in  "real  value"  {Tr.  II.  p.  196),  or 
calls  it  a  "real  variation"  in  value,  in  distinction  from 
a  "relative  variation"  in  the  values  of  commodities 
compared  with  one  another  {Tr.  II.  p.  176).  In  another 
passage,  in  a  summary  at  the  end  of  the  TraiU  (III.  p. 


*  Traits,  Vol.  II.  pp.  94-5,  100,  Cours,  pp.  199-200.  Notice  that  the 
reason  assigned  for  the  relative  constancy  of  the  demand  and  supply  of 
wheat  is  the  opposite  of  the  reason  given  for  this  by  Locke.  It  shows 
the  influence  of  the  Malthusian  theory  of  population. 

tin  this  last  passage  he  again,  however,  pays  attention  to  the 
demand  and  supply. 


CONFUSED    ECONOMISTS  107 

307),  he  made  this  distinction  of  "prices";  and  else- 
where said  that  in  the  course  of  time  things  that  can  be 
produced  only  at  greater  labor -cost  will  rise  in  price 
without  an  inverse  fall  in  the  value  of  money  (C.  p. 
205a).*  And,  contrariwise,  as  it  is  desirable  that 
things  in  general  should  be  produced  with  greater 
facility,  he  considered  it  to  be  well  for  a  country  that  its 
prices  should  fall  {Tr.  II.  p.  188,  cf.  p.  193). 

Thus  far,  although  there  is  a  partial  divergence 
from  Ricardo  in  the  theory  of  relative  values,  there  is 
almost  perfect  agreement  with  Ricardo  in  the  concep; 
tion  of  the  measure  of  value  through  the  course  of  time. 
Yet  this  agreement  is  not  justified  by  the  primary  con- 
ceptions established  by  Say,  and  is  frequently  repudiated 
by  him  in  the  clearest  terms.  Say  confined  the  term 
'Walue"  to  "exchangeable  value"  {G.  p.  33b),  reject- 
ing use -value  as  a  mere  synonym  for  utility,  t  He 
defined  "value"  as  the  quantity  of  everything  else 
obtainable  in  exchange  for  it,t  and  said  that  the 
"  value  "  of  a  thing  is^  measured  by  the  quantity  of  other 
things  it  will  exchange  for,  rising  if  it  will  purchase 
more,  and  falling  if  it  will  purchase  less,  1 1  and  of  money 
itself  that  its  "value  "  varies  inversely  with  variations  in 
general  prices  (OfAivres,  p.  51),  and  in  general  that  "the 


*And  reversely  of  things  falling  in  price  because  of  cheaper  produc- 
tion, without  affecting  the  "value "of  money,  in  a  letter  to  Mr.  James, 
published  in  the  Morning  Chronicle,  Aug.  21st  1823,  and  quoted  by 
Tooke,  Thoughts  and  details  on  the  high  and  low  prices  of  the  last 
thirty  years,  London,  1823,  p.  180. 

tin  a  letter  to  Ricardo,  1821,  published  in  his  Oeuvres  diverses, 
Paris,  1848,  p.  419. 

t  Traiti,  Vol.  II.  p.  156,  cf.  Vol.  1.  p.  3,  Vol.  II.  p.  154,  Vol.  III.  p. 
328;  Cours,  p.  34  b,  180  a-b. 

WCours,  pp.  34-35,  Oeuvres,  p.  47  (this  being  in  his  Catiehismt 
d'6conomie  politique,  first  published  in  1817). 


108  HISTORICAL    SURVEY 

idea  of  the  value  of  an  object  always  supposes  some 
relation  with  the  value  of  another  object"  (C.  p.  34b). 
Thus  by  "value"  he  avowedly  meant  exchange- value 
proper.  Even  the  language  he  used  in  finding  fault 
with  the  idea  of  any  "  measure  of  value  "  shows  that  he 
did  so  merely  because  he  found  impossibility  in  measur- 
ing general  exchange -value  by  means  of  the  varying 
quantities  of  all  other  things.*  Here  is  a  position 
entirely  distinct  from  Ricardo's,  and  in  Ricardo's 
Principles  occurs  a  passage  in  which  an  argument  of 
some  length  is  directed  against  Say's  conception  of 
wealth  and  of  value  as  being  measured,  not  by  the  cost 
of  production  of  the  thing,  but  merely  b}'  the  quantity 
of  other  things  purchasable. t  And  Say  himself,  in  a 
letter  to  Ricardo,  accepted  this  interpretation  of  his 
doctrine,  and  rejected  cost  of  production  as  a  measure 
of  the  utility  which  in  his  opinion  constitutes  value 
iOeiivres,  p.  419). 

Therefore  when  Say  asserted,  with  almost  all  econ- 
omists, that  stability  of  value  is  one  of  the  requirements 
in  money,!  it  is  impossible  to  tell  what  he  meant.  To 
be  sure,  there  was  a  similar  inconsistency  in  Ricardo's 
own  teaching;  but  in  Ricardo's  the  use  of  "value"  as 
cost-value  predominated.  In  Say's  words  it  is  impos- 
sible to  tell  which  idea  prevailed.  He  thought 
money  had  been  depreciating,  since  the  discover}'  of 
America,  in  "real  value,"  thus  distinguishing  a  kind  of 
value  from  the  exchange -value  to  which  he  had  said 
political  economy  is  confined,  or  perhaps,  like  others, 
making    this    a    sub -class    under   exchangeable   value. 


•Cf.  Traits,  Vol.  II.  pp.  87,  89,  Coiirs,  p.  34b,  Oeuvres,  p.  49n. 
t Ricardo's  Works,  pp.  169-71. 
tCours,  pp.  176a,  177a,  190b. 


CONFUSED    ECONOMISTS  109 

But  there  is  no  especial  assertion  that  he  wanted 
money  to  be  invariable  in  such  real  value  rather  than 
in  exchange -value  proper,  or  "nominal  value"  (but 
extended  from  particular  to  general),  unless  this  is  to 
be  gathered  from  the  epithets  applied  to  them.  In  one 
of  the  passages  expressing  desire  for  invariability  in  the 
"value"  of  mone3%  there  is,  indeed,  reference  to  the 
quantity  of  things  purchasable,*  which  would  make  hira 
have  exchange -value  proper  in  mind.  But  in  presence 
of  his  longer  disquisitions  about  the  fall  in  value  of 
silver  (  =  money)  since  the  discovery  of  America,  in 
which  he  meant  its  fall  in  cost -value,  this  one  passage 
is  not  enough  to  allow  us  to  decide  that  what  he  wanted 
was  invariability  in  exchange -value. 

Doubt  as  to  the  intention  is  also  occasioned,  for  a 
different  reason,  by  the  leader  of  modern  economics  in 
Spain,  Alvaro  Florez  Estrada.  In  his  Curso  de  Econ- 
oniia  politica,  1828, t  Estrada  clearly  distinguished  value 
into  cost-value  under  the  names  of  "natural,"  "real," 
or  "necessary  value,"  and  exchange -value  under  the 
names  of  "venal"  or  "conventional  value"  or  "value  in 
exchange"  (pp.  13,  49).  "Real  value"  he  identified 
with  cost  of  production  (pp.  14,  15,  19),  on  the  prin- 
ciple that  a  day's  labor  is  an  equal  sacrifice  without 
regard  to  skill,  wherefore  the  product  is  of  equal  value 
without  regard  to  quantity  (p.  15).  And  "venal  value" 
he  defined  as  purchasing  power  over  products  or  labor 
(p.  20). t  He  perceived  that  "for  a  thing  to  have  an 
invariable  venal  value  it  would  be  necessary  that  it 
should  always  purchase  the  same  quantity  of  products 


*  Cours,  p.  190b;  cf.  also  p.  176a. 

t  References  are  to  the  sixth  edition,  Madrid,  1848,  Vol.  II. 

J  And  so  of  the  "conventional  value  of  money,"  p.  55. 


110  HISTORICAL    SURVEY 

or  of  labor"  (p.  22).  He  also  held  in  an  extreme 
degree  the  Ricardian  theory  that  relative  (exchange-) 
values  are  regulated,  permanently,  by  the  costs  of  pro- 
duction of  the  things  exchanged  (pp.  17,  37);  and 
thence  concluded  that  an  article  produced  by  an  equal 
duration  of  labor  would  have  "an  invariable  value" 
(p.  17),  and  expressly  rejected  Adam  Smith's  wages 
standard  (p.  18).  It  is  evident,  however,  that  he  is 
here  referring  to  "real  value,"  that  is,  to  cost-value. 
Now  he  wants  invariability  of  "value"  in  money  (p. 
159),  or  the  greatest  approach  thereto  (p.  160).  But 
the  difficulty  for  us  is  that,  having  two  kinds  of  value, 
he  never  tells  us  which  kind  it  is  he  wants  money  to  be 
stable  in.  From  his  applying  the  term  "real  value"  to 
cost-value  we  might  infer  that  he  wanted  stability  in 
this  kind  especially.  Yet  he  said  that  to  know  the 
"  value  "  of  money  in  antiquity  it  would  be  necessary  to 
know  its  quantity  and  that  of  goods  and  the  quantities 
of  these  given  for  it  in  exchange  (p.  62);  and  in  his 
Beflexiones  aeerca  del  mal  extraordinario  que  en  el  dia 
aflige  a  la  Inglaterra,  etc.,  London,  1827,  he  had  like- 
wise treated  of  value  in  the  sense  of  exchange -value  as 
the  important  element  to  be  considered  in  money  (espe- 
cially pp.  12,  23). 

§2.  Say's  statement  that  wheat  is  the  best  standard 
of  value  both  because  its  cost  of  production  is  the 
stablest  and  because  its  demand  and  supply  are  rel- 
atively the  most  uniform,  calls  for  some  attention;  for, 
while  the  former  of  these  reasons  is  a  requirement  for 
stability  of  cost -value,  the  latter,  as  we  have  already 
noticed,  is  a  requirement  for  stability  of  esteem-value, 
and  so  the  two  are  different  things.  Indeed,  we  have 
also   seen   that   in   the   latter   there   is   another  double 


CONFUSED   ECONOMISTS  111 

entendre,  since  it  may  be  a  requirement  either  for 
stability  of  esteem -value,  as  just  said,  or  for  stability  of 
exchange -value,  according  as  the  term  "demand"  is 
used  as  meaning  intensity  of  desire  in  those  who  bid  for 
the  thing,  or  as  meaning  the  quantity  of  other  things 
offered  by  them  in  exchange  for  it.  Thus  we  have  in 
this  one  passage  of  Say's  the  union  not  only  of  cost- 
value  and  esteem -value,  but  of  these  and  exchange- 
value.  But  Say  does  not  stand  alone  here.  In  economic 
reading  we  frequently  meet  with  a  statement  like  the 
following,  made  by  an  early  American  economic  his- 
torian: "For  an  absolute  standard  of  value,  we  should 
have  to  find  something,  the  cost  of  production  of  which 
should  be  the  same  at  all  times,  and  in  all  places,  and 
the  demand  and  supply  of  which  should  never  vary  in 
the  smallest  degree."*  Now,  in  such  statements  there  is 
a  combination  both  of  Ricardo's  and  of  Adam  Smith's, 
or  rather  of  Locke's,  doctrines  of  value,  not  to  speak  of 
the  third  permeating  conception  of  exchange-value 
proper.  The  two,  let  alone  the  third,  are  by  no  means 
consistent  elements.  For  even  though  the  cost  of  pro- 
duction remain  the  same,  the  quantity  may  not  be  sup- 
plied sufficiently  to  keep  the  demand  from  raising  the 
esteem -value  of  the  article.  The  strict  holder  of  the 
Ricardian  doctrinet  should  maintain,  with  Say  in  one 
passage  {Tr.  II.  p.  209),  and  with  McCulloch,t  that 
"value"  is  according  to  the  cost  of  production  of  the 
article  without  any  regard  to  the  quantity  of  it  supplied; 
although,  as  Say  elsewhere  implied,  and  as  McCulloch 

*W.  M.  Gouge,  An  inquiry  into  the  principles  of  the  American  bank- 
ing system,  prefixed  to  his  Short  history  of  paper-money  and  banking 
(1833),  2d.  ed.,  New  York,  1835,  p.  10a. 

tRicardo's  Works,  p.  213. 

tNotesto  Wealth  of  nations,  1863,  pp.  98-9n,  481. 


112  HISTORICAL    SURVEX 

at  the  same  time  said,  this  is  so  only  of  non- monopo- 
lized industries,  or  of  things  suppliable  in  unlimited 
quantities,  which  reverts  to  saying  that  the  quantity 
supplied  is  of  consequence.  Hence  it  is  not  strange 
that  the  author  above  cited  should  have  added:  "It  is 
impossible  even  to  fancy  such  a  thing;"  and  that  others 
should  assign  the  union  of  these  two  qualities  as  a 
reason  why  an  invariable  standard  is  impossible.  And 
if  the  demand  and  supply  are  to  be  constant  also  in 
such  a  way  as  to  keep  constant  the  thing's  exchange- 
value,  the  reason  is  increased  for  regarding  the  invari- 
able standard  as  impossible.  But  of  course  it  is  not 
good  logic,  in  order  to  show  that  a  thing  is  impossible, 
first  intentionally  to  put  incompatible  requirements  into 
the  conception  of  it.  The  only  reason  for  maintaining 
these  incompatible  requirements  is  that  they  are  all  re- 
quirements for  the  stability  of  the  "value"  of  an  article. 
But  the  moment  we  recognize  that  value  is  of  several 
kinds,  we  see  that  these  are  requirements  of  the  different 
kinds  of  value,  and  so  no  longer  deserve  to  be  placed 
together.  To  be  sure,  the  holders  of  the  cost-of-pro- 
duction  theory  have  always  admitted  the  demand -an  d- 
supply  theory  for  fluctuations  in  "value"  over  short 
periods  (over  which  periods  presumably  all  the  kinds  of 
value  fluctuate  together).  They  may,  then,  add  this 
requirement  of  equable  supply  and  demand  to  the  re- 
quirement of  constant  cost  of  production,  in  order  that, 
while  the  latter  provides  constancy  of  value  over  long 
periods,  the  former  shall  fill  in  constancy  of  value  over 
the  constituent  short  periods.*     But  this  is  not  done  by 

•This  seems  to  have  been  done  by  F.  Bowen  in  his  Minority  report 
on  fJie  silver  question,  1877,  republished  in  his  Gleanings  from  a  literary 
life,  New  York,  1880,  p.  45;  but  was  not  done  by  the  same  author  in  his 
Principles  of  political  econotny,  1856,  p.  290. 


CONFUSED   ECONOMISTS  113 

the  greater  number  of  economists  who  have  employed 
these  two  elements;  for  they  have  generally  employed 
them  both  as  applying  to  wheat,  and  expressly  only  over 
long  periods,  admitting  that  supply  and  demand  in  the 
case  of  wheat  are  not  well  balanced  over  short  periods. 
Again,  the  demand-and-supply  doctrine  may  mean  that 
the  demand  and  supply  are  so  proportioned  as  to  keep 
the  article's  exchange -value  at  its  cost-value  (which 
then  is  supposed  to  be  constant).  But  this  they  expect 
always,  in  the  long  run,  to  happen  in  the  case  of  all 
articles  suppliable  in  unlimited  quantities,  to  which  the 
theory  is  confined.  Thus  in  every  light  it  is  viewed  in, 
there  is  no  good  reason  for  uniting  the  requirement  of 
equable  supply  and  demand  to  the  requirement  of  con- 
stant cost  of  production.  The  latter  alone  is  the  sole 
requirement  for  constancy  of  cost -value.  To  add  the 
other  is  to  add  a  requirement  either  for  constancy  of 
esteem -value  or  for  constancy  of  exchange -value,  which 
need  not  in  either  case  fit  with  the  other  requirement. 

§3.  Returning  from  this  digression,  we  find  that 
almost  the  same  ambiguities  as  Say's  are  to  be  found 
in  the  views  of  the  leading  German  economist,  Roscher. 
Roseher  divided  "economic  value"  into  "use -value," 
"cost-value,"  and  " exchange- value  "  (§§  4-5).*  Pos- 
sessed of  this  terminology,  we  might  expect  from  him 
something  definite.  Indeed,  in  two  passages,  he  speaks 
of  exchange -value  as  if  it  were  the  value  of  which  he 
desires  the  stability  in  money  (§§  120,  123).  But  there 
is  a  Section  of  his  work  devoted,  not  to  the  measure  of 
value  in  either  of  its  kinds,  but  to  the  "measure  of 
price,"  meaning   here    by  "price"    some    general    kind 


♦Of  his  Grundlagen  der  NationalSkonomie,  10th  ed.     Stuttgart,  1873 
(the  first  edition  was  in  1854). 


114  HISTORICAL    SURVEY 

of_ value,  although  the  only  definition  he  ever  gave 
of  "price"  (in  §  100)  was  of  a  particular  exchange- 
value,  that  is,  of  the  exchange -value  of  a  thing  in  some 
particular  other  kind  of  thing.  Now,  he  tells  us  that  if 
we  mean  by  such  a  measure  a  "constant  purchasing 
power,"  this  is  impossible  (§  127).  Instead  of  this,  he 
would  set  up  the  conception  of  a  commodity  "  on  which 
the  inner,  from  itself  arising,  elements  of  price -determi- 
nation always  exert  a  uniform  influence,"  and  which 
could  therefore  serve  for  indicating  that  changes  in 
exchange -value  of  other  things  relatively  to  it  are  due 
to  causes  residing  in  them  and  not  in  it  —  that  they, 
and  not  it,  are  becoming  cheaper  or  dearer.  And  he 
thought  that  in  such  a  commodity  would  belong  "two 
conditions:  (1)  that  for  the  same  number  of  men  the 
same  quantity  of  it  should  under  all  circumstances  have 
the  same  use-value,  (2)  that  this  same  quantity  should 
under  all  circumstances  require  the  same  cost  of  pro- 
duction, so  that  its  supply  could  always  advance  equally 
with  the  number  of  those  who  want  it"  (ibid.).  Here 
again  is  a  mixture  in  one  proposition  of  the  require- 
ments for  constancy  in  esteem-value  and  in  cost-value. 
And  yet  we  cannot  be  sure  that  even  this  was  the 
quality  in  money  wanted  by  him.  He  proceeds  to 
reject  both  Adam  Smith's  and  Ricardo's  standards  of 
value,  though  treating  them  rather  as  theories  of  rela- 
tive exchange -values  (§  128);  and  then  states  that  a 
"constant  measure  of  price"  would  be  the  general  level 
of  all  prices,  and  only  finds  fault  with  it  for  its  imprac- 
ticability (§  129).  In  this  price-level  he  would  include 
the  price  of  labor,  or  wages,  and  give  a  prominent  place 
to  it,  for  a  reason  verj'  much  like  Senior's,  but  not  to 
the  exclusion  of  the  prices  of  material  things.     And  as 


CONFUSED    ECONOMISTS  115 

something  practicable  he  seems  to  wind  up  by  prefer- 
ring a  standard  composed  of  wheat,  or  the  principal 
food,  and  "the  precious  metal"  {ibid.).  To  repeat,  in 
this  his  principal  work  he  does  not  explain  in  what 
value  he  wants  money  to  be  stable.  But  in  a  small 
paper  on  the  bimetallic  question,  published  in  1872,  he 
says  gold  would  be  preferable  to  silver  if  it  were  sub- 
ject to  less  "variations  of  price,"  because,  as  money  is  a 
measure,  "the  chief  requirement  in  good  money  is  the 
least  possible  variability  of  its  own  value."*  Here  the 
word  "price,"  used  of  the  money  metal  itself,  has  no 
particular  meaning,  since  he  does  not  tell  us  in  what 
object  the  exchange -value  of  money  is  referred  to.  If 
by  it  he  meant  to  refer  to  all  things,  he  would  have 
meant  by  it  the  general  exchange -value  of  money. 
But  when  in  the  next  sentence  he  avoids  use  of  the 
full  term  "exchange -value"  and  speaks  of  "its  own 
value,"  in  money,  he  seems  to  have  in  mind  reference 
to  the  "inner,  from  itself  arising,  elements  of  price- 
determination  "  before  given  as  the  quality  in  a  com- 
modity having  a  constancy  by  relation  to  which  the 
variations  of  other  things  could  be  measured,  a  con- 
stancy which  we  have  seen  to  be  of  esteem -value  or  of 
cost-value.  What  was  Roscher's  real  opinion,  there- 
fore, seems  to  be  unfathomable. 

Another  leader  of  German  economics  showed  no  such 
indecision,  but  variation  of  opinion,  within  the  same 
covers.  In  his  Volkstvirthschaftslehre,  1868,  Rau  ob- 
jected to  confining  "value"  to  exchange -value,  and 
employed  "concrete  use -value"  for  esteem -value  in  dis- 
tinction from  "general  use-value"  as  use-value  proper 
(§§  57-58,  64).     But  he  said  that  money  ought  always 

*  Betrachtungen  ilber  die  WUhrtingsfrage,  Berlin,  1872,  p.  14. 


116  HISTORICAL    SURVEY 

to  retain  the  same  "  price  "  in  relation  to  the  whole  of 
other  goods  (§  174,  of.  §  177);  which  can  onlj'  mean 
that  money  ought  to  be  stable  in  general  exchange- 
value.  He  then  spoilt  this  conception  by  adding  that 
in  measuring  the  variations  of  money  by  other  goods  we 
should  seek  to  eliminate  the  causes  of  changes  residing 
in  the  goods,  and  should  therefore  confine  ourselves  to 
articles  the  least  exposed  to  such  causes  (§  175).  And 
yet,  after  rejecting  Ricardo's  labor-cost  standard  (§  181) 
and  the  wheat  standard  (§  182),  he  again  returned  to, 
and  casually  adopted,  the  labor -cost  standard  for  money 
(§260). 

Doubleness  of  statement  is  also  to  be  found  in  the 
Traits  d^Economie  politique  of  Joseph  Garnier,  first 
published  in  1848.*  By  "value"  this  author  said  only 
"exchange -value"  is  meant  (§  373),  and  he  defined  it  as 
purchasing  power. t  He  also  frequently  employed  the 
conception  of  the  commodity  standard,  judging  of  the 
"value"  of  a  thing  by  the  quantity  of  other  things  it 
will  exchange  for,t  or  inversely  by  the  prices  of  things 
(§§  410,  440) .  Now  he  wanted  for  money  the  material 
the  most  stable  in  "value"  (cf.  ,§444),  and  we  might 
infer  he  meant  the  most  stable  in  exchange -value.  But 
he  also  asserted  that  progress  consists  in  a  general  fall 
of  "values"  (§  384),  which  use  of  the  term  "value"  can 
refer  only  to  cost -value  or  esteem -value.  And  he  even 
went  so  far  as  to  say  that  progress  consists  in  a  general 
fall  of  "prices"  (§§  66,  409*,  cf.  §  819),  provided  wages 


•  References  are  to  the  ninth  edition,  Paris,  1889. 

t§§  13,  412,  432;  in  §  430  this  definition  is  applied  to  "relative 
value." 

t§§  300,  406,  411;  in  the  last  he  says  this  of  Malthus's  "intrinsic 
value  in  exchange"! 


CONFUSED   ECONOMISTS  117 

do  not  fall  (§  763),  which  means  a  rise  in  the  exchange- 
value  of  money. 

An  eminent  author  whom  we  still  have  with  us  made 
his  first  important  contribution  to  economics  and  statis- 
tics during  the  period  contemporary  with  the  economists 
whose  works  we  have  been  reviewing.  In  La  Question 
de  rOr,  published  in  1858,  Professor  Levasseur  would 
determine  the  problem  which  of  two  things  changing 
relatively  to  each  other  is  rising  or  falling  in  value  or  is 
stationary,  not  by  reference  to  their  costs  of  production, 
but  by  reference  to  all  other  commodities,  asserting  that 
all  commodities  cannot  rise  or  fall  in  value  together  (pp. 
138,  158).  He  therefore  devoted  much  statistical  labor 
to  discover  what  had  recently  been  the  movement  of  the 
general  level  of  prices  in  France  (pp.  179-195),  doing 
so  evident!}'  for  the  purpose  of  finding  the  change  in 
the  value  of  money;  for  he  said  the  value  of  money 
varies  inversely  as  the  prices  of  all  commodities  (p. 
138).  Yet  at  the  very  commencement  of  the  work  he 
showed  his  conception  of  a  commodity  constant  in  value 
to  be  of  one  "which  always  costs  the  same  effort  to  pro- 
duce, and  which  is  always  equall}'  desired,  and  equally 
ready  to  satisfy  the  needs  of  man"  (p.  2) — the  old  mix- 
ture of  the  requirements  for  stability  of  cost -value  and 
of  esteem-value.  He  there  also  said  that,  though  they 
are  not  perfect  standards  of  value,  labor  and  wheat  are 
the  best  we  have,  even  saying  that  "Adam  Smith  and 
Chevalier  have  proved  this  "  (pp.  2-3).*  Also  towards 
the  end  of  the  work  he  asserted  that  gold  is  more  stable 
in  value  than  silver  because  gold  is  produced  with 
ordinary  unskilled  labor,  little  subject  to  improvement, 


*He  had  himself  used  the  wheat   standard    in    Une   mithode  pour 
mesurer  la  valeur  de  Vargeni,  Journal  des  Economistes,  May  1856. 


118  HISTORICAL    SURVEY 

while  silver  is  produced  in  conjunction  with  other 
metals  from  which  it  has  to  be  separated  by  chemical 
processes,  which  admit  of  greater  improvement  in  the 
advance  of  science,  thus  allowing  for  much  variation  in 
the  cost  of  producing  it  (pp.  332-3).  This  is  Ricardo's 
cost-of-production  standard  of  "value,"  which  is  the 
standard  only  of  cost -value.* 

Another  great  French  economist,  belonging  to  the 
empirical  school,  Paul  Leroy-Beaulieu,  who  has  recently 
summed  up  the  studies  of  a  lifetime  in  a  monumental 
work,  Traite  theorigue  et  pratique  d^ Economic  politique, 
Paris,  1895,  has  not  succeeded,  in  our  subject,  in  giving 
us  consistent  instruction.  Mostly,  and  in  the  more 
theoretical  parts  of  the  work.  Professor  Leroy-Beaulieu 
treats  of  the  "value"  of  money  as  its  exchange-value, 
defining  it  so,  and  saying  that  it  varies  inversely  as 
prices.!  Consequently,  rejecting  the  labor  standard  as 
well  as  the  wheat  standard  (p.  92),  he  recommends  the 
tabular  standard  of  index  -  numbers  as  the  proper 
method  of  measuring  variations  in  the  value  of  money.! 
In  long  contracts  he  thinks  it  well  to  keep  steady,  not 
the  social  power,  but  the  purchasing  power,  of  the  debt 
(p.  346).  He  even  looks  with  favor  upon  the  scheme 
(Lowe's)  of  paj'ing  debts  in  sums  of  money  varying  so 
as  to  represent  the  same  exchange -value,  according  to 
the  indications  yielded  by  the  tabular  standard  (pp.  120, 

♦Similarly  he  later  approves  of  gradually  falling  prices  on  the 
ground  that  cheapness  is  the  result  of  most  of  the  improvements  intro- 
duced by  science,  and  that,  after  all,  the  principal  object  of  interest  is 
not  value,  but  wealth,  in  Compte  Rendu  du  Congr^s  mondtaire  inter- 
national tenu  h  Paris  1889,  Paris,  1890,  pp.  90-1. 

tVol.  III.  pp.  146,  147,  cf.  pp.  204-6,  220,  222.  The  references  are 
all  to  this  volume. 

tPp.  93,  233-6,345-8;  but  with  the  inclusion  of  the  wages  of  com- 
mon labor,  agricultural  and  artisan,  pp.  93,  235n,  320,  348. 


CONFUSED   ECONOMISTS  119 

345-9).  And  yet,  coming  to  the  then  obtrusive  prac- 
tical question  of  the  gold  and  silver  standards,  or 
bimetallism,  he  defended  the  gold  standard  as  having 
during  late  years  shown  itself  normal  (pp.  322-3), 
because  it  is  a  great  law  of  progress  that  the  prices  of 
products  should  fall  while  the  wages  of  labor  rise 
(pp.  314-15).*  This  great  law  of  progress  is  what  we 
have  seen  in  Gamier  —  the  fall  of  prices  in  accompani- 
ment with  the  fall  in  the  costs  of  production,  in  the 
cost- values,  of  the  products  ;t  which  means  that  money 
is  desired  to  remain  stable  in  cost-value. 

Somewhat  similar  to  Garnier's  is  also  the  inconsist- 
ency in  the  work  of  the  Spanish  economist  Madrazo. 
In  his  Lecciones  deEconomia  politica,  Madrid,  1874-6, 
Madrazo  asserts  that  economists  have  come  to  agree- 
ment in  confining,  and  he  himself  confines,  the  term 
"value"  to  the  meaning  of  exchange -value  (Vol.  I.  p. 
108) ;  and  as  measure  of  it  he  rejects  gold  and  silver 
(pp.  118-19),  wheat  (p.  119),  and  also  labor,  or  the 
value  of  labor  (pp.  119-120).  Treating  it  as  exchange- 
value,  he  recognizes  that  all  values  cannot  rise  or  fall 
together  (pp.  117,  134-5).  But  he  immediately  adds 
that  values  (he  is  speaking  generally)  have  a  tendency 
towards  falling,  through  improvements  in  production, 
although  things  that  are  due  to  the  limited  forces  of 
nature  have  not  this  tendency  in  so  great  a  degree  as 
other  things  (p.  117).  And,  again,  he  says  that  prices 
tend  to  fall  because  costs  tend  to  fall  (p.  135),  and 
seems  to  approve.     Then,  in  treating  of  money,  he  says 

*He  does  not  mean  that  in  the  tabular  standard  itself  the  rise  of 
wages  has  offset  the  fall  of  prices;  for  he  assigns  very  small  weight  to 
wages,  at  most  twice  that  of  wheat  alone. 

tYet  he  speaks  of  the  period  1851-70,  when  prices  were  rising,  as 
the  most  progressive  period  ever  known,  p.  207. 


120  HISTORICAL    SURVEY 

that  the  variations  of  its  value  are  regulated  by  the 
difficulties  of  acquisition,  and  that  these  difficulties  are 
directly  as  demand  and  inversely  as  supply  (Vol.  II. 
p.  452) ;  which  would  seem  to  place  the  invariability 
of  its  value  in  both  the  conditions  of  constant  diffi- 
culty of  acquisition  and  of  a  constant  relation  between 
demand  and  supply,  wrongly  brought  together  in  a 
causal  relationship.  When  these  are  separated,  as  in  a 
period  of  progress  in  regard  to  commodities,  including, 
say,  silver,  so  that  the  relation  between  its  demand 
and  supply  is  constant,  but  without  progress  in  the 
mining  of  gold,  so  that  the  difficulty  of  acquiring  it  is 
constant,  we  have  no  indication  as  to  which  of  these 
two  metals  he  would  prefer  for  money. 

§4.  Confusion,  again  occasioning  in  us  inability  to 
find  the  real  opinion  intended,  appears  in  the  work  of 
John  Stuart  Mill,  and  from  him  passes  into  the  works 
of  his  followers.  In  his  Principles  of  Political  Economy, 
first  published  in  1848,*  Mill  said  that  in  this  science 
the  term  "value"  means  only  "exchange  value"  (I.  p. 
538),  declared  his  intention  to  use  it  only  in  this  sense 
{ihid.  and  II.  p.  12),  and  defined  it  as  "general  power 
of  purchasing,"  or  "command  over  purchasable  com- 
modities in  general"  (I.  p.  538). t  Accordingly  he  said 
"the  value  of  one  thing  must  always  be  understood 
relatively  to  some  other  thing,  or  to  things  in  general" 
(I.  p.  565),  and  recognized  that  "values"  cannot  all  rise 
or  fall  together  (I.  pp.  5t0,  565,  572,  588).     But  at  the 

♦References  are  to  the  eighth  edition,  London,  1878. 

tHe  even  speaks  of  value  as  meaning  "the  quantity  of  other  things 
which  can  be  obtained  in  exchange  for"  the  thing  in  question,  Vol.  I.  pp. 
565,  588,  or  even  as  being  "what  it  will  exchange  for,"  Vol.  II.  p.  11. 
However  inaccurate,  these  are  definitions  of  "value  "  only  in  the  sense 
of  exchange-value. 


CONFUSED   ECONOMISTS  121 

very  beginning  of  his  inquiry  into  the  nature  of  "value" 
he  committed  the  mistake  of  considering  all  measure- 
ment of  variation  in  the  "general  exchange -value"  of  a 
thing,  by  combining  and  averaging  the  different  varia- 
tions of  its  particular  exchange -values,  to  be  impossible 
(I.  pp.  538-9).  He  therefore  distinguished  between  a 
variation  in  general  exchange-value  due  to  causes  in 
the  thing  itself,  and  a  variation  in  its  general  exchange- 
value  due  to  causes  in  the  particular  objects  with  which 
it  is  exchanged;  and  because  of  the  difficulty,  or  impos- 
sibility, of  measuring  the  latter,  he  said  he  would  treat 
only  of  the  former,  which  is  measurable  because  in  this 
case  the  commodity  in  question  would  vary  equally  in 
comparison  with  all  the  rest,  they  being  supposed  un- 
changed amongst  themselves  (I.  pp.  539-40).  In  doing 
this,  like  Malthus,  he  unnecessarily  gave  up  examining 
some  of  the  causes  of  the  variations  of  the  value  of  a 
thing,  and  so  exposed  himself  from  the  very  start  to 
error  due  to  incompleteness.  When  he  came  to  deal 
with  the  value  of  money,  this  source  of  error  began  to 
tell.  He  still  says  "the  value  of  money  is  what  money 
will  exchange  for;  the  purchasing  power  of  money" 
(IlT^.  11),  and  contrasts  it  with  prices,  telling  us  that 
the  value  of  money  varies  inversely  as  "general  prices" 
{ibid.) .^  Then  on  coming  to  treat  of  money  as  a 
"Measure  of  Value,"  in  the  sense  of  a  standard  of 
value  through  the  course  of  time,  he  again  repeats  that 
because  of  the  different  variations  of  its  particular 
exchange -values,  "we  cannot  even  suppose  any  state 
of  circumstances  in  which  it  would  be  true"  that  money, 
or  any  other  commodity,  may  retain  always  "the  same 


•Similarly  Vol.  I.  p.  541,  Vol.  11.  pp.  15,  301.     In  Vol.  I.  p.  86  "a 
general  and  permanent  rise  of  prices"  is  called  "depreciation  of  money." 


122  HISTORICAL    SURVEY 

exchange -value,  the  same  general  purchasing  power" 
(II.  p.  103).  Variations  in  the  value  of  money  he  then 
wishes  to  measure,  as  at  the  beginning,  only  if  they 
come  from  itself,  not  if  caused  by  variations  in  com- 
modities. He  is  still  clear  enough  in  his  ideas  to  dis- 
tinguish the  "measure  of  cost  of  production"  from  the 
"measure  of  exchange -value,"  and  to  recognize  that  "a 
commodity  universally  produced  by  the  same  quantity 
of  labor"  (with  some  further  qualifications)  would  not 
necessarily  be  constant  in  exchange -value.  But  such  a 
commodity  he  thinks  would  be  of  service,  because  by  it 
we  could  measure  changes  in  cost  of  production  of  other 
things  directly  by  the  changes  of  their  exchange -values 
m.  it.  And  "this  measure  of  cost,"  he  now  says,  "is 
what  political  economists  have  generally  meant  by  a 
measure  of  value"  (II.  pp.  103-4).*  He  thus  himself 
seems  to  accept  this  as  a  measure,  not  of  exchange- 
value,  but  of  "value."  But  of  what  kind  of  value? t 
In  the  same  passage  he  said  of  the  commodity  so  con- 
ceived "•  "We  should  then  have  a  commodity  always 
produced  under  one  and  the  same  combination  of  all 
the  circumstances  which  affect  permanent  value."  He 
seems,  then,  to  take  it  as  the  measure  of  "permanent 
value."  This  kind  of  value,  so  determined,  is  cost- 
value,  as  he  himself  once  calls  it  (I.  p.  588).  Now,  he 
tells  us  that  gold  and  silver  are  the  best  materials  for 
money  because  they  are  the  least  variable  in  "value" 
(II.  pp.  6,  78),  and  the  first  reason  he  assigns  is  that 


*  The  amount  of  truth  in  this  statement  may  be  judged  from  the 
preceding  survey,  and  from  what  follows  in  Chapter  VII. 

tNot  of  esteem-value,  for  on  the  next  page  he  said  that  labor  is  vari- 
able in  "value"  with  its  varying  command  over  commodities.  He  thus 
excluded  himself  from  using  the  wages  standard,  or  earnings  standard 
in  general. 


CONFUSED   ECONOMISTS  123 

they  are  the  least  variable  in  cost  of  production  (II.  p. 
6).  As  is  well  known,  Mill  held  the  cost -of -production 
theory  of  relative  values  for  long  periods,  but  for  short 
periods  ascribed  much  influence  over  "temporary  or 
market  value"  to  supply  and  demand,  and  even,  espe- 
cially in  the  case  of  the  money  metals,  admitted  that  the 
influence  of  cost  of  production  is  exerted  only  through 
its  effect  upon  supply  (II.  pp.  27-30,  cf.  pp.  12-22,  51). 
But  in  all  the  passages  treating  of  this  subject  he 
omitted  to  speak  of  comparative  costs,  or  the  relation 
between  the  cost  of  the  precious  metals  and  the  costs  of 
other  commodities  in  general  (because  of  his  pre-deter- 
mination  to  suppose  these  latter  stationary)  ;*  and  so  he 
seems  to  have  fallen  momentarily  into  the  idea  that  the 
"permanent  or  natural  value"  of  the  precious  metals 
varied  only  with  the  absolute  variations  in  their  costs 
of  production,!  notwithstanding  that  such  "permanent 
or  natural  value"  is,  like  the  "temporary  or  market 
value"  with  which  it  is  contrasted,  only  a  variety  of 
exchange -value,  and  is  so  treated  by  himself,  t  Yet  he 
rightly  said,  following  Malthus,  that  we  ought  to  dis- 
tinguish between  "the  regulator,  or  determining  prin- 
ciple, of  value"  and  "the  measure  of  value"  (II.  pp. 
105-6).     This  is  precisely  what  he  himself  did  not  do 


*In  Vol.  II.  pp.  13  and  16  he  appears  to  do  so,  but  only  in  the  simple 
case  of  supposing  that  all  commodities  change  alike. 

tSo  also  of  "the  permanent  values  of  all  things  "  in  Vol.  II.  p.  270, 
although  he  there  recognized  that  with  general  progress  exchange-values 
do  not  fall.  He  there  also,  pp.  270-1,  recognized  that  prices  need  not 
fall,  if  the  improvement  in  production  extend  equally  to  the  money 
metal  (cf.  also  pp.  301-2).  But  he  expressed  no  opinion  whether  he 
wanted  the  money  metal  so  to  fall  in  cost  and  be  steady  in  exchange- 
value,  or  to  be  steady  in  cost  and  in  "permanent  value,"  and  therefore  to 
rise  in  exchange-value. 

Jin  the  "Summary  of  the  Theory  of  Value,"  Vol.  I.  pp.  588-591. 


124  HISTORICAL    SURVEY 

in  treating  the  "measure  of  cost"  as  the  "measure  of 
value."  Still,  we  have  his  other  statements  about  the 
"value"  of  money  varying  inversely  as  "general  prices," 
and  even  in  one  passage  we  find  him  so  treating  the 
"permanent  value  of  money,"  identifying  it  merely  with 
"the  natural  and  average  prices  of  commodities"  (II.  p. 
51),  instead  of  abandoning  it  to  the  fluctuations  of  their 
market  prices.  And  in  a  couple  of  passages  we  find 
him  arguing  against  Hume's  recommendation  of  money 
increasing  in  quantity  so  much  as  to  cause  a  general 
rise  of  prices  (II,  pp.  15,  87),  as  if  he  thought  that  a 
constancy  of  prices  was  the  proper  thing,  although 
viewing  a  general  rise  of  prices  as  of  no  consequence 
"apart  from  existing  contracts"  (I.  p.  541),  A  bold 
exegete  would  he  be,  therefore,  who  should  definitely 
assert  that  what  was  really  desired  in  money  by  Mill — 
the  man  who  thought  the  theory  of  value  complete 
(I,  p,  537),  and  who  feared  to  say  more  lest  he  should 
leave  nothing  for  the  reader  to  do  (I,  p.  593) — was 
stability  in  cost -value  or  stability  in  exchange -value. 

In  America  Francis  Bo  wen,  who  in  his  Principles  of 
Political  Economy,  Boston,  1856,  accepted  Mill's  doc- 
trines about  the  cost -of -production  theory  of  relative 
values  and  the  disturbing  influence  of  demand  and 
supply  especially  in  the  case  of  money  (p,  402),*  bor- 
rowed from  Mill  also  his  confusion.  Bowen  confined 
the  term  "value"  to  "exchangeable  value"  (p,  33),  and, 
identifying  "real  value"  with  "real  selling  price,"  defined 


*  For  the  cost-of -production  theory  applied  to  relative  values  see  pp. 
45,  47,  etc.  On  p.  41  it  is  said:  "The  labor  required  is  a  measure  of  the 
value  produced."  This,  which  is  applied  only  to  relative  values.  Is  im- 
mediately spoilt  by  the  addition  of  a  measurement  of  the  labor  itself 
by  "its  comparative  efficiency,"  which  is  the  same  as  measuring  it  by  the 
value  of  its  products,  and  so  runs  in  a  circle. 


CONFUSED    ECONOMISTS  125 

it  as  "the  amount  of  the  necessaries,  conveniences,  or 
amusements  of  life  that  can  be  obtained  in  exchange" 
for  the  thing  (p.  292);  and  treated  a  change  in  salaries 
and  wages  as  only  "  nominal "  unless  accompanied  by  a 
change  in  their  purchasing  power  over  "  necessaries  and 
comforts"  {ihid.),  thus  viewing  this  change  alone  as  a 
real  one.  Holding  also  that  the  most  important  quality 
of  money  is  "its  stability  of  value"  (p.  303),*  he  de- 
voted some  attention  to  the  standard  of  value  for  dif- 
ferent times.  Wheat  he  pronounced  a  better  standard 
than  our  current  money,  both  because  its  cost  of  pro- 
duction is  stabler,  and  because  its  supply  is  better  pro- 
portioned to  the  demand  (p.  290), —  thus,  like  so  many 
others,  mixing  up  two  distinct  reasons. t  A  s_till  better 
standard  he  thought  to  be  found  "by  taking  the  average 
prices  of  a  dozen  of  the  most  necessary  articles  in  com- 
mon use"  (p.  290),  the  principle  being  to  select  "certain 
leading  commodities,  which  are  in  uniform  and  perpetual 
demand"  (p.  395).  Even  in  this  multiple  standard  the 
idea  is  that  the  value  of  money  is  to  be  measured,  not 
so  much  by  comparison  with  all  goods,  or  with  the 
greatest  number  possible,  but  by  comparison  only  with 
those  which  are  more  likely  than  it  to  be  stable  in 
value;  which  means  a  conception  of  "value"  other 
than  of  exchange -value  proper,  and,  as  the  reasons 
assigned  for  the  wheat  standard  show,  a  conception 
which  is  a  composite  of  cost-value  and  esteem -value,  t 


*Cf.  also  in  the  Minority  report,  in  Gleanings,  pp.  52-4. 

tOn  p.  393  he  used  onlj-  the  cost-of -production  reason,  and  imitated 
Mill  in  applying  it  to  " permanent  or  average  value,"  but  not  in  speaking 
of  this  as  depending  upon  "the  average  cost  of  production,"  and  espe- 
cially not  in  saying:  "A  tolerably  accurate  measure  of  this  cost,  so  long 
as  the  demand  remains  the  same,  is  the  quantity  annually  produced." 

J  For  different  places  he  found  the  best  standard  in  "the  value  of  an 


126  HISTORICAL    SURVEY 

But  now  again  the  original  idea  of  ''  value "  as  ex- 
change-value comes  into  prominence.  Bo  wen  wrote  at 
a  time  when  a  general  rise  of  prices  and  "depreciation" 
of  money  was  expected,  on  account  of  the  recent  greatly 
extended  production  of  gold.  In  dealing  with  this  sub- 
ject he  everywhere  identified  a  variation  in  the  "value" 
of  money  with  an  inverse  variation  of  prices,*  and 
measured  its  depreciation  entirely  by  the  rise  of  prices, t 
or  by  the  fall  of  its  purchasing  power  over  commodi- 
ties (p.  407);  and  whatever  evil  he  anticipated,  he 
placed  in  this  lessened  purchasing  power,  over  com- 
modities, of  fixed  incomes  (p.  406).  He  did,  however, 
depart  from  Mill  and  return  to  Hume  in  not  only  not 
minding,  but  even  in  welcoming,  the  impending  slight 
and  gradual  depreciation  of  money  and  rise  of  prices, 
due  to  natural  causes  (pp.  412-16,  423);  which  posi- 
tion, though  a  slight  deflection  from  the  stable  standard 
of  exchange -value,  was,  in  a  period  of  progress  such  as 
that  in  which  he  wrote,  a  considerable  deviation  from 
the  stable  standard  of  cost -value  or  of  esteem -value. 
Thus,  in  general,  Bowen's  standard  was  of  exchange- 
value,  though  he  lapsed  at  times  into  treating  the 
desirable  feature  in  money  as  if  it  were  stability  in 
cost -value  and  esteem -value. 

Another  American  writer  may  also  be  cited  for  show- 
ing similar  confusion.  C.  A.  Mann  in  his  Paper  Money, 
the  Boot  of  Evil,  New  York,  1872,  regarding  stability  of 
value  as  the  fundamental  quality  of  money  (pp.  157, 
258),  identified  "value"  with  purchasing  power  (pp.  8, 
156),  recognizing  also  that  all  values  cannot  advance 

ordinary  day's  labor  of  a  person  of  average  strength  and  health,"  at  the 
same  time  allowing  this  to  be  very  inexact,  p.  291. 

•Pp.  298,  :!0G.  402,  400;  in  the  last  of  the  "relative  value"  of  money. 

tPp.  405.  410,  and  in  the  Minority  report,  pp.  35-6,  37n. 


CONFUSED    ECONOMISTS  127 

together  (p.  8).  He  wanted  debts  to  be  paid  "with 
money  of  the  same  value  as  that  in  which  they  were 
contracted"  (p.  294),  and,  this  quality  failing,  to  be 
adjusted  "according  to  the  value  or  purchasing  power 
of  the  money  in  which  they  were  contracted"  (p.  350), 
viewing  any  increase  in  the  value  or  purchasing  power 
of  money  as  a  tax  upon  the  debtor,  or  rather  confisca- 
tion of  his  property,  since  "he  must  part  with  a  greater 
quantity  of  commodities  or  property  in  order  to  realize 
the  means  of  payment,"  as,  reversely,  when  the  pur- 
chasing power  of  money  decreases,  the  creditor  is  taxed 
or  robbed  (pp.  195-6).  He  admitted,  indeed,  that  dur- 
ing the  recent  years  of  contraction  improvements  in 
farming  "have  offset  in  part  the  evil  effects  of  the  cur- 
rency;" but  maintained  that  this  fact  "does  not  palliate 
the  wrong.  The  currency  deprives  the  agricultural  class 
of  the  increased  welfare  the  use  of  machinery  would 
naturally  bring"  (p.  208).  All  this  points  unmistak- 
ably to  exchange -value  being  the  kind  of  value  in  which 
he  desired  stability  of  money.  But  the  whole  is  spoilt 
by  the  wrong  use  of  a  doubtful  theory  of  value.  He 
held  that  "the  permanent  value"  of  the  precious  metals, 
like  that  of  everything  else,  depends  principally  on  the 
cost  of  production,  and  that  gold  and  silver  vary 
little  in  such  value  because  their  cost  of  production 
varies  little  (pp.  6,  12).  The^" permanent  value"  thus 
admired  in  metallic  money  is  cost -value. 

In  England  Henry  Fawcett  likewise  showed  pre- 
ponderating preference  for  the  idea  that  money  ought  to 
be  stable  in  exchange-value,  with  lapsing  into  another 
idea.  In  his  Manual  of  Political  Economy,  first  pub- 
lished in  1863,*  the  term  "value"  is  said  to  be  confined 

•  References  are  to  the  sixth  edition,  London,  1883. 


128  HISTORICAL    SURVEY 

to  "exchange -value"  (p.  347),  and  to  be  "estimated  by 
the  power  which  a  commodity  has  to  obtain  commodities 
in  exchange  for  it"  (p.  358),  and  in  the  case  of  money 
is  identified  with  its  "purchasing  power"  (pp.  462, 
509).  The  author  discloses  a  well-defined  concep- 
tion of  "general  exchange  value,"  and  acquaintance 
with  the  law  that  there  cannot  be  "a  general  rise  or  fall 
in  the  value  of  all  commodities"  (p.  312).  He  declares 
simply  that  the  "value"  of  monej'  ought  to  be  as  stable 
as  possible  (pp.  349-50,  351,  479);  and  that  by  this  he 
meant  its  purchasing  power,  is  further  indicated  by  his 
saying  that  "a  general  rise  or  fall  in  prices  means  that 
the  standard  of  value  is  altered,"  and  that  it  is  "of  great 
importance  that  general  prices,  or,  in  other  words,  the 
value  of  gold,  should  fluctuate  as  little  as  possible"  (p. 
409).*  Had  Fawcett  confined  himself  to  these  state- 
ments, he  would  have  had  to  be  put  among  the  econo- 
mists who  simply  favor  stability  of  money  in  exchange- 
value.  But  unfortunately,  in  one  passage,  he  found 
fault  with  the  test  by  "  comparison  of  general  prices " 
not  only  because  of  the  practical  difficulty  of  working  it, 
but  also  for  the  reason  that  it  does  not  take  account  of 
the  causes  of  the  price  changes;  and  he  would  have  us 
"make  allowance"  for  such  causes  (pp.  480-1).  This 
occurs  in  a  Chapter  on  the  Gold  Discoveries  in  the 
50ties,  and  is  immediately  followed  by  passages  in  which 
the  increased  production  of  gold  is  said  to  have  coincided 
with  a  "new  era"  in  industry  and  commerce,  so  that  the 
fall  in  the  "value"  of  gold  was  retarded,  and  reduced  to 


*  Similarly  on  p.  370,  where  it  is  said  that  a  "general  decline  in 
prices  "  due  to  the  quantity  of  money  not  keeping  up  with  the  increase 
of  population  and  wealth,  "is  quite  as  undesirable  as  a  general  rise  in 
prices," 


CONFUSED  ECONOMISTS  129 

very  small  amount,  by  the  increased  commodity  demand 
for  gold;  whereas  if  that  increase  in  the  gold  supply 
had  not  taken  place,  the  "value"  of  gold  must  inevi- 
tably have  greatly  risen  (pp.  483-4),  — which  is  a  return 
to  the  conception  of  exchange -value.  Yet,  again,  in 
speaking  of  the  "decline  in  general  prices"  which  took 
place  between  1873  and  1883,  the  date  of  the  last  edition 
during  the  author's  lifetime,  he  would  not  allow  that 
this  decline,  although  stated  at  a  considerable  figure,  in- 
dicated any  marked  rise  in  the  "value"  of  gold,  because 
of  the  inconclusiveness  before  alluded  to  of  such  a  test 
(pp.  480,  487-8),— which  seems  to  show  that  his  doubt 
about  that  test  was  produced  on  purpose  to  meet  the 
present  case.*  However  this  be,  by  the  causes  for  which 
he  wants  allowance  to  be  made,  he  can  only  have  refer- 
ence to  improvements  in  the  production  and  transporta- 
tion of  commodities,  the  increasing  quantities  of  which 
tend  to  lower  their  "prices  "  "quite  independently  of  any 
change  in  the  value  of  money"  (p.  480);  and  so  he, 
too,,  was  impressed  by  the  idea  of  cost- value. t 

§5.  Here  among  the  undecided  are  to  be  placed  also 
two  eminent  economists  of  the  present  day.  Professor 
Alfred,  Marshall,  in  an  article  on  Remedies  for  Fluctua- 
tions in  Prices,  in  the  Contemporary  Review  for  March 

*If  so,  Fawcett  would  belong  among  the  economists  in  the  next  Sec- 
tion, but  for  his  putting  these  passages  in  the  same  work  with  his 
former  statements  still  left  unchanged. 

tin  Mill  and  his  school,  it  may  be  noticed,  no  reference  being  made 
to  wages  as  a  standard  of  value,  there  was  little  employment  of  the  idea 
of  esteem-value,  and  their  confusion  lies  chiefly  between  exchange-value 
and  cost-value.  Also,  because  of  the  considerable  influence  ascribed  to 
demand  and  supply,  the  idea  of  exchange-value  came  into  greater  promi- 
nence, although  the  cost-of-produetion  idea  stood  in  reserve,  to  be  called 
upon  whenever  needed.  In  the  former  respect  Mill's  school  is  distin- 
guished from  Adam  Smith's,  and  in  the  latter  from  Ricardo's. 


130  HISTORICAL    SURVEY 

1887,  looked  with  favor  upon  Lowe's  scheme  of  regula- 
ting contracts  according  to  exchange -value  (pp.  363-5)  .* 
He  rejects  bimetallism  principally  because  by  a  mistaken 
argument  he  makes  out  that  under  it  money  is  little 
more  stable  in  exchange -value  than  under  the  gold 
standard  alone  (pp.  360-2). t  As  a  substitute  he  sug- 
gested a  plan  that  has  since  been  called  "symmetallism," 
of  using  gold  and  silver  conjointly,  which  might  ulti- 
mately include  many  other  commodities,  extending  the 
dual  standard  to  a  multiple  standard  (pp.  368-71).  Of 
the  unit  provided  by  the  latter  standard  he  said  that,  in 
spite  of  its  imperfections,  "even  in  its  simplest  and 
most  easily  workable  form,  this  unit  gives  a  tenfold  bet- 
ter standard  of  value  than  that  offered  by  the  precious 
metals"  (p.  372).  Here  he  also  definitely  maintained 
that  fixed  incomes,  which  are  certain  amounts  of  money, 
should  preserve  the  same  purchasing  power,  and  not 
increase  in  such  power  as  to  keep  up  with  the  advance 
of  social  wealth  (p.  375),  i.  e.  not  be  stable  in  esteem- 
value.  About  the  same  time,  in  his  Evidence  before  the 
Gold  and  Silver  Commission,  he  would  confine  the  term 
"  appreciation  "  of  gold  to  what  he  called  "  its  old  usage  " 
of  meaning  a  fall  in  general  prices  (q.  9625).  But  here 
a  deflection  begins.  He  would  use  the  term  "apprecia- 
tion "  also  in  another  sense,  contrasted  with  prices,  as 
power  of  purchasing  labor,  and  spoke  of  this  as  "real 
value"  (ibid.).     And  because  a  general  fall  of  prices 


*ln  his  earlier  work,  written  in  collaboration  with  Mrs.  Marshall, 
The  economics  of  industry,  1879,  "value  "had  everywhere  been  treated  as 
value  in  exchange  or  purchasing  power,  see  (in  the  edition  of  1888)  pp. 
68,  09,  150-1,  158. 

tThis  opinion  is  maintained  also  in  his  Evidence  before  the  Gold 
and  Silver  Commission,  Appendix  to  the  Final  Report,  1888,  q.  10,002; 
and  in  his  Principles  of  economics, Vo\.  I.  3d  ed.  1895,  p.  674n. 


CONFUSED   ECONOMISTS  131 

without  a  fall  of  wages  gives  better  real  wages,  he 
averred  it  to  be  his  opinion  that  the  fall  of  prices  which 
had  lately  been  going  on  "causes  the  wealth  of  the 
country  to  be  more  equally  distributed  than  it  would  be 
if  the  high  prices  of  1873  had  been  maintained"  (q. 
9805),  and  viewed  its  continuance  with  equanimity  (q. 
9816).*  And  still  in  the  first  volume  of  his  unfinished 
Principles  of  Economics  (3d  ed.  1895)  he  exhibits  the 
same  curious  inconsistency.  Here  he  confines  the  term 
"value"  to  exchange -value  (p.  8),  and  clearly  states 
that  what  he  conceives  to  be  the  proper  functioning  of 
money  is  its  remaining  steady  in  its  "purchasing  power 
o_ver  things  in  general"  or  its  "general  purchasing 
power"  (pp.  9,  185,  432 n,  673-4 n).t  And  yet  in  one 
passage  (p.  674  n  at  bottom)  he  abandons  the  whole 
case  by  conceding  that  the  evils  which  generally  accom- 
pany falling  prices  do  not  exist  when  the  fall  is  due  to 
lessened  cost  of  production  of  the  articles,  asserting 
that  in  this  case  without  such  a  fall  injustice  would  be 
done  to  certain  classes  of  wage -earners  whose  wages  or 
salaries  or  fees  are  fixed  by  custom,  and  approving  the 
recent  fall  of  prices  for  "following  the  increasing  com- 
mand by  man  over  Nature." 

President  A.  T.  Hadley,  in  his  Economics,  New 
York,  1896,  says:  "The_value  of  money  is  measured  by 
the  quantity  of  other  things  which  a  unit  of  money  will 
purchase.  It  varies  inversely  as  the  general  level  of 
prices"  (p.  193). t     He  also  speaks  of  "depreciation"  as 


*Yet  in  the  1888  edition  of  the  Economics  of  industry  there  is  an 
insertion  pointing  out  evils  in  falling  prices,  pp.  155-6. 

tHe  also  now  applies  the  term  "real  value"  to  such  purchasing 
power  over  things  intended  for  consumption,  while  purchasing  power 
over  labor  he  calls  "labor-value,"  p.  708. 

J  With  the  last  cf.  pp.  189-90,  192n,  206. 


132  HISTORICAL    SURVEY 

"loss  of  purchasing  power,"  at  least  when  it  follows 
inflation  of  debased  currency  (p.  190),  and  says  "the 
supply  and  the  demand  of  gold  money  are  in  equilib- 
rium "  when  they  are  such  as  to  dispose  of  all  the  gold 
in  either  the  currency  or  the  arts  "at  a  given  price 
level"  (p.  201).  Consequently  he  devotes  some  atten- 
tion to  the  method  of  averaging  variations  of  prices 
(pp.  193-4) ;  but  the  scheme  (Lowe's)  of  applying  the 
"tabular  standard"  to  contracts  he  rejects  as  impracti- 
cable, and  apparently  only  for  this  reason  (p.  207) .  Yet 
he  has  objected  to  the  ordinary  index -numbers  that  they 
omit  notice  of  services  or  wages,  that  they  use  only 
wholesale  prices,  and  that  they  are  confined  to  a  few 
central  points  of  consumption  instead  of  being  extended 
to  the  many  scattered  points  of  production  (p.  195).  In 
dealing  now  with  the  question  of  bimetallism,  to  the 
claim  that  of  late  money  has  been  appreciating  he 
objects  that  the  fall  of  prices  (which  is  admitted,  p. 
195)*  has  been  due  chiefly  to  the  falling  costs  of  pro- 
duction (pp.  211-12),  apparently  as  if  this  explanation 
did  away  with  the  "appreciation"  of  gold,  although  it 
cannot  do  away  with  its  increased  purchasing  power, 
which  is  the  very  fact  it  is  adduced  to  explain.  He 
urges  also  that  debtors  have  not  suffered,  because  they 
do  not  have  to  repay  more  labor,  which  he  now  treats  as 
the  subject  of  contracts,  saying  that  what  the  debtor 
really  borrows  is  "a  certain  amount  of  control  of  labor" 
(p.  213).  Here  he  is  using  the  labor  standard.  And  he 
uses  the  same,  or  the  cost  standard,  immediately  later 


*He  also  speaks  of  "the  scarcity  of  gold,  so  severely  felt  in  recent 
times,"  and  says  it  is  now  "adjusting  itself  by  an  increase  in  supply," 
p.  204,  and  adds:  "If  this  process  continues,  the  present  very  low  price 
level  can  be  only  temporary,"  p.  205. 


CONFUSED  ECONOMISTS  133 

in  contrasting  the  depreciation  of  silver  with  the 
appreciation  of  gold  so  far  as  admitted,  placing  the 
former  in  a  great  fall  of  the  "marginal  cost"  of  silver 
and  the  latter  in  a  slight  rise  of  the  "marginal  cost"  of 
gold  (pp.  213-14),  without  any  thought  of  comparing 
these  changes  with  what  has  been  going  on  in  the 
"marginal  costs"  of  commodities  in  general.  He  also 
lays  stress  upon  the  fact  that  adjustment  of  the  rate  of 
interest  does  much  to  counterbalance  losses  and  gains  to 
contracting  parties  for  advancing  or  receding  prices 
(pp.  212,  226-7);*  which  pro  tanto  means  that  varia- 
tion in  the  purchasing  power  or  exchange -value  of 
money  is  indifferent. 

§6.  Finding  such  inconsistency  in  the  works  of  the 
theoretical  economists,  we  cannot  be  surprised  at  meet- 
ing similar  inconsistency  in  the  wntings  of  persons 
excited  by  a  political  contest.  In  the  recent  contro- 
versy on  the  bimetallic  question  the  inconsistency  ap- 
pears mostly  on  the  side  of  advocates  of  the  single  gold 
standard,  because  they  alone  were  desirous  of  denying 
the  conclusions  drawn  from  the  commodity  standard 
that  gold  money  had  of  late  appreciated  and  that  silver 
had  not  depreciated,  and  yet,  in  common  with  all  per- 
sons who  use  the  term  "value"  in  the  sense  of  exchange- 
value,  they  have  a  natural  inclination  to  accept  the 
commodity  standard  whenever  they  can,  or  when  they 
are  off  guard.  It  may  be  instructive,  though  it  is  not 
edifying,  to  review  the  opinions  of  some  of  these  writers. 

In  one  of  the  early  papers  (of  1889)  reprinted  in 
Studies  in  Currency,  London,  1898,  Lord  Farrer,  speak- 
ing of  gold  as  "the  measure  of  value,"  refers  to  the 
effect  upon  contracts  of  a  change  in  its  "value  or  pur- 

•Cf.  J.  B.  Clark's  doctrine. 


134  HISTORICAL   SURVEY 

chasing  power"  (p.  102),  and  frequently  shows  his 
conception  of  "value"  to  be  of  exchange -value  proper, 
defining  "value"  either  as  "simply  what  can  be  got  for" 
the  article  possessing  it  (p.  90  n),  or  as  "a  relation 
between  two  or  more  things"  (p.  103,  cf.  p.  60),  ad- 
mitting that  "fall  in  prices"  and  "appreciation  of  gold" 
are  "only  different  forms  of  expression  for  the  same 
thing"  (p.  60,  cf.  p.  51),  and  treating  a  sovereign  as  a 
"unit  of  purchasing  power"  (p.  102).  But  in  the  same 
paper  he  speaks  of  a  general  fall  in  prices  taking  place 
without  "any  change  in  the  measure  of  value,"  if  the 
fall  be  due  to  increased  abundance  of  the  things  sold, 
and  implies  that  the  measure  of  value,  which  is  money, 
would  be  constant  if  "the  price  of  labor  remains  the 
same,"  while  the  prices  of  commodities  fall  "in  conse- 
quence of  improvements  in  production"  (p.  35).  Simi- 
larly in  a  later  paper  (1894)  he  speaks  of  "an  ideal 
standard  of  value"  being  "a  fixed  quantity  of  human 
labor,"  and  considers  the  monetary  standard  to  be  good 
if  the  rate  of  wages  be  constant,  while  prices  fall  so  as 
to  raise  the  real  remuneration  of  labor  (p.  307).  The 
argument  for  this  position  is  merely  that  with  steady 
prices  wages  will  not  rise  in  the  same  proportion  with 
the  improvements  in  production,  so  that  the  wage-earners 
will  not  get  their  full  share  of  the  economic  advance.* 
Here  we  have  Adam  Smith's  sole  wages  standard. 
From  this  he  soon  deflects.  In  later  papers  (1895  and 
1897)  he  again  defines  "value"  as  "the  quantity  of 
other  things  for  which  it  will  exchange,"  and  wants, 
as   the   best   standard   of  "value,"  a   material  "which 


*But  on  p.  124,  speaking  of  the  conditions  after  the  gold  discoveries 
in  the  50ties,  he  had  said:  "prices  increased,  and  wages  increased  in  a 
still  greater  proportion." 


CONFUSED   ECONOMISTS  135 

varies  as  little  as  may  be  in  its  relation  to  other 
things"  (p.  5).  But  the  passage  shows  that  under 
"things"  he  includes  "a  day's  labor."  And  so  again, 
when  he  says  "all  sensible  men  desire  a  standard  of 
value  which  shall  be  as  stable  as  possible  in  respect  of 
all  the  different  things  which  it  is  employed  to  meas- 
ure," because  he  would  include  wages  and  salaries  and 
rents  and  retail  prices  and  the  prices  of  luxuries  in  his 
list  of  prices  to  be  averaged  (cf.  pp.  252-3,  298),  he 
thinks  himself  justified  in  adding  that  "when  all  prices 
are  taken  into  account,  there  is  nothing  whatever  in  the 
recent  history  of  prices  to  show  that  our  present  stand- 
ard of  value  is  unstable"  (p.  265).  Here  we  have 
the  commodity-and-wages  standard,  likewise  of  Adam 
Smith.  This  is  not  yet  all.  Silver  he  condemns 
because  it  has  fallen  in  "value"  even  though  its  fall 
in  "value"  were  concurrent  with  the  general  fall  in 
"value"  of  commodities,  in  which  case  he  recognizes 
that  silver  prices  would  be  stable  (pp.  218,  366),  and 
in  which  he  ought  to  see  that  the  exchange -value  in 
commodities  of  silver  would  be  stable.  Here  by  such  a 
"depreciation  of  commodities"  he  can  mean  only  a  fall 
in  cost -value  or  esteem -value.  Therefore  he  objects  to 
a  fall  of  prices,  as  an  injury  to  debtors,  only  if  the  fall 
be  due  to  a  "scarcity"  of  gold^  causing  its  "value" 
(cost -value  or  esteem -value)  to  rise,  but  not  if  due  to 
an  abundance  of  goods  that  causes  their  "values"  (the 
same)  t^  fall  to  the  extent  indicated  by  their  prices 
(pp.  61,  64,  134,  250) ;  for  in  this  case  he  conceives  of 
the  "value"  of  money  as  remaining  stable,  and  he  will 
allow  a  fall  of  prices  to  be  "appreciation"  of  money 
only  if  the  cause  of  the  fall  be  something  happening 
to   money   (p.   297).      Yet   this   commodity-and-wages 


136  HISTORICAL    SURVEY 

standard  would  show  money  to  be  stable  only  if  the 
rise  of  wages  were  sufficient  to  compensate  the  fall  of 
prices;  but  nothing  is  here  said  about  wages,  so  that 
the  reference  must  be  to  conditions  of  production. 
Thus  we  seem  to  have  four  standards:  the  commodity 
standard,  of  exchange -value  proper;  the  wages  stand- 
ard, of  esteem -value;  the  commodity-and- wages  stand- 
ard, of  exchange -value  in,  or  purchasing  power  over, 
commodities  and  labor;  and  the  standard  of  cost -value, 
the  method  of  measuring  which  is  not  described. 

Professor  Laughlin  in  his  History  of  Bimetallism  in 
tie  United  States,  New  York,  1885,  affirmed  that  "the 
highest  justice  is  rendered  by  the  state  when  it  exacts 
from  the  debtor  at  the  end  of  a  contract  the  same  pur- 
chasing power  which  the  creditor  gave  him  at  the  begin- 
ning of  the  contract,  no  less,  no  more"  (p.  70,  similarly 
again  p.  192) .  In  the  Preface  to  this  work  he  recognized 
the  use  of  the  term  "appreciation"  in  the  sense  of  in- 
crease in  purchasing  power  even  though  the  cause  lie 
with  commodities  and  not  with  money  (p.  x) ;  and  for  the 
purpose  of  securing  stability  of  such  purchasing  power, 
he  advised  bimetallists  to  advocate  rather  the  adoption 
of  the  "multiple  standard"  system  (pp.  x-xi).  The 
same  position  is  also  maintained  in  his  Elements  of  Po- 
litical Economy,  New  York,  1887,  where  he  treats  the 
"multiple  standard"  independently  of  the  bimetallic 
controversy  (pp.  76-7).  He  here  defines  value  as  a 
"ratio,"  and  the  "value  of  money"  as  "a  relation  of 
money  to  all  things  which  are  exchanged  for  it"  (p.  75), 
and  opposes  fall  in  value  of  money  to  general  rise  of 
prices,  and  reversely  (pp.  64-5),  and  says  "there  can- 
not be  a  general  rise  or  fall  in  the  values  of  commodi- 
ties" (p.  64).     The  following  very  definite  proposition 


CONFUSED  ECONOMISTS  137 

is  laid  down:  "A  long  contract,  like  a  government  or  a 
railway  bond,  ought  not  to  be  settled  by  paying  back 
the  amount  of  gold  or  silver  borrowed,  but  by  giving 
the  lender  a  sum  which  would,  at  the  time  of  repayment, 
purchase  the  amount  of  commodities  for  which  the 
money  loaned  could  have  exchanged  at  the  time  that  it 
passed  from  the  lender  to  the  borrower"  (p.  76).  Yet 
almost  simultaneously  with  this,  in  an  article  on  Gold 
and  Prices  in  the  Quarterly  Journal  of  Economics,  April 
1887,  while  admitting  that  a  general  fall  of  prices  had 
recently  taken  place,  he  did  not  admit  either  scarcity  or 
appreciation  of  gold,  because  the  fall  of  prices  was  due 
to  causes  affecting  commodities.  Here  the  word  "ap- 
preciation "  is  used  in  another  sense,  and  the  existence 
of  the  thing  is  denied,  because,  in  a  corresponding  sense 
of  the  contrary  term,  he  believed  that,  instead,  there 
had  been  depreciation.  In  a  similar  manner  he  had,  in 
the  first  work,  the  History,  spoken  both  of  gold  and 
silver  as  being  "changed  in  value,  like  other  commodi- 
ties, under  the  influence  of  a  lowered  cost  of  produc- 
tion" (p.  113),  without  reference  to  other  things, — 
which  is  a  fall  in  their  cost -values.  Both  the  positions 
occur  again  in  the  campaign  book.  Facts  ahoiit  Money, 
or  Laughlin  versus  Coin,  Chicago,  1895.  Here  all  the 
definitions  are  of  value  as  exchange -value  proper:  — 
value  is  only  relative,  it  is  what  the  thing  will  exchange 
for,  it  is  purchasing  power  "over  commodities  in  gen- 
eral" (pp.  75,  147,  192).  "When  a  man  borrows  $1000 
he  borrows  a  claim  on  goods  in  general,  and  the  money 
is  only  a  go-between"  (p.  152);  money  "is  only  a 
medium  for  getting  from  goods  to  other  goods"  (p.  80) ; 
"the  important  thing  is  the  quantity  of  things  for 
which  gold  will  exchange"  (p.  76).     Values  cannot  all 


138  HISTORICAL   SURVEY 

rise  or  fall  together  (pp.  147-8);  but  prices  can,  and  a 
variation  of  general  prices  constitutes  an  opposite  vari- 
ation of  the  value  of  money  (pp.  117,  119,  146,  H8) ; 
and  as  money  is  a  measure  of  value,  not  only  stability 
in  its  value  (p.  87),  but  stability  in  the  level  of  prices, 
is  desired  (p.  134,  cf.  pp.  119,  156),  one  of  our  needs 
being  for  a  "stable  standard  of  prices"  (p.  158).  In 
conformity  with  this  position,  he  argues  against  the 
bimetallists  that  gold  is  the  stable  standard,  and  silver 
has  depreciated,  because  gold  prices  are  now  at  nearly 
the  same  level  as  in  1860  (passing  behind  1873),  while 
silver  "has  fallen  away  from  all  commodities,"  that  is, 
silver  prices  have  risen  (the  fact  that  this  change  took 
place  before  1873  being  ignored).*  He  also  frequently 
balances  causes  operating  on  gold  over  against  causes 
operating  on  commodities,  to  effect  a  change  in  the 
value  of  money  or  in  the  general  level  of  prices;  and 
finding  such  causes  both  in  supply  and  demand  (espe- 
cially so  on  the  side  of  money,  p.  176,  following  Mill), 
and  in  cost  of  production,  he  discovers,  all  told,  four 
causes  of  change  in  the  value  of  money  or  in  the  level 
of  prices.!  The  two  sets  of  causes  may  operate  on  both 
sides  together,  and  he  recognizes  that  the  value  of 
money  and  the  general  level  of  prices  will  be  altered, 
if  there  is  excess  in  their  operation  on  one  side;  other- 
wise, the  opposite  forces  neutralizing  each  other,  the 
value  of  money  and  the  general  level  of  prices  remain 
unaltered  (p.  100).  All  this  is  perfectly  plain,  and  it 
is  true  of  exchange -value,  and  only  of  exchange-value. 


*Pp.  154,  194,  196,  198-200,  229,  249.  But  on  p.  153  the  comparison 
Is  inadvertently  made  with  1873. 

tPp.  109-10,  cf.  pp.  76,  192.  These  four  causes  we  shall  later  see 
developed  by  an  earlier  economist,  who  treated  only  of  exchange-value. 


CONFUSED   ECONOMISTS  139 

But  now  again  he  confines  such  balancing  only  to 
"prices,"  saying:  "prices  can  be  changed,  (1)  by  an 
increase,  or  (2)  decrease  in  the  value  of  gold;  or  (3)  by 
an  increase,  or  (4)  decrease  in  the  cost  of  goods"  (p. 
114);  and  he  explains  the  fact,  which  at  first  had 
astonished  him,  that  prices  when  he  wrote,  in  spite  of 
the  great  cheapening  in  the  costs  of  production  of  com- 
modities, were  not  sensibly  lower  than  in  1860,  by  the 
counterbalancing  influence  not  only  of  the  cheapening 
in  the  cost,  but  also  of  the  lowering  in  the  "value,"  of 
gold  (pp.  194,  250).  "Gold,"  he  says,  "has  also  fallen 
in~value  because  of  its  lessened  cost,  and  the  joint  result 
of  the  fall  of  goods  and  the  fall  of  gold  is  that  prices 
are  not  much  different  from  the  level  of  1860"  (p.  196). 
All  this  amounts  to  saying  that  the  causes  previously 
allowed  to  be  causes  of  a  change  in  the  "value"  of 
money  as  well  as  of  a  change  in  prices,  if  acting  either 
on^  money  or  on  commodities,  or  on  both  unequally, 
though  still  allowed  to  be  causes  of  a  change  in  prices, 
are  no  longer  allowed  to  be  causes  of  a  change  in  the 
"value"  of  money  unless  they  act  directly  on  money, 
no  such  change  being  allowed  to  exist  if  those  pre- 
viously assigned  causes  act  only  on  commodities,  so 
that  they  now  cease  to  be  causes  of  this  kind  of  change; 
and  no  balancing  is  now  allowed  in  the  case  of  "valuCj^" 
sWe  the  status  of  the  "  value  "  of  money  is  now  viewed 
as  depending  entirely  upon  how  the  causes  act  on  mone^ 
and  not  at  all  upon  how  they  act  on  commodities.  The 
previous  balancing,  for  instance,  between  costs,  pro- 
ducing constancy  both  in  the  "  value  "  of  money  and  in 
the  level  of  prices,  is  now  a  balancing  both  of  costs  and 
of  "values,"  producing  constancy  only  in  the  level  of 
prices.     Of  this  difference  of  position  (for  it  is  not  a 


140  HISTORICAL   SURVEY 

change,  as  the  two  are  mixed  together)  we  have  the 
key,  although  no  hint  of  it  is  given  by  the  author  to 
his  readers.  In  the  last -quoted  passages  the  fall  in 
the  "value"  of  gold,  which,  as  counterbalancing  the 
fall  in  the  "values"  of  goods,  is  used  to  explain  the 
equality  in  the  level  of  prices  in  1895  and  in  1860,  is  a 
fall  in  cost-value,  while  the  equality  in  the  level  of  prices 
constitutes  an  equality  in  the  exchange -value  of  money 
at  those  two  periods.  Similarly  the  author  explains  the 
falls  in  the  prices  of  various  and  all  commodities  which 
have  taken  place  since  1873  (or  1865  as  he  once  says, 
pp.  248-9),  by  special  causes,  principally  various  cheap- 
euings  in  the  costs  of  production,  affecting  the  "values" 
of  the  commodities  alone,  and  entirely  independent  "of 
the  money  question"  (pp.  122-3,  165-7,  196,  230,  249). 
Here,  too,  the  term  "values"  means  cost-values;  and 
as  it  is  maintained  that  during  this  period  the  cost- 
values  of  commodities  are  exactly  represented  by  their 
prices,  it  is  virtually  held  that  during  this  period  the 
cost-value  of  money  has  remained  stable.  Thus  Pro- 
fessor Laughlin  defends  the  gold  standard  both  because 
it  shows  stability  in  exchange -value  between  1860  and 
1895,  and  because  it  shows  stability  in  cost-value  since 
1873.  In  this  work  there  is  occasional  reference  to  the 
rise  of  wages  during  the  recent  period  as  contributing 
to  the  proof  that  gold  is  not  scarce  or  appreciated  (pp. 
164-5,  196).  More  use  of  this  feature  in  the  question 
is  made  in  the  Professor's  recent  Report  of  the  Monetary 
Commission,  Indianapolis,  1898.  Here  some  of  the  posi- 
tions of  the  preceding  work  are  repeated.  The  author 
speaks  of  gold  having  fallen  in  cost  of  production,  and 
of  its  having  become  "depreciated"  "as  compared  with 
human   labor"  (p.    101).     And   the   movement   of   the 


CONFUSED   ECONOMISTS  141 

standard  (gold) — its  lagging  behind  commodities  in 
the  downward  course  of  cost- values  —  he  approves, 
and  so  approves  its  rise  in  exchange -value  in  com- 
modities. In  fact,  he  treats  the  view  that  the  money 
metal  should  "follow  the  general  tendency  of  goods  to 
fall  in  value,"  i.  e.  that  money  should  fall  in  cost-value 
proportionally  with  goods  so  as  to  retain  constant  its 
exchange -value  in  goods,  as  the  position  of  his  oppo- 
nents, the  discussion  of  the  justice  of  which  he  will  here 
omit  (pp.  98-9).  Yet  in  this  very  work  he  has  started 
out  by  defining  "value"  in  a  way  applicable  only  to 
exchange -value  in  commodities,  saying  that  "the  value 
of  a  commodity,"  and  hence  also  of  money,  "is  the 
quantity  of  another  commodity,  or  of  other  commodi- 
ties, for  which  it  will  exchange"  (p.  77,  similarly  p. 
78).  Thus,  although  in  this  work  he  desires  in  the 
standard  of  deferred  payments  "  stability  of  value " 
(p.  83),  it  is  not  stability  of  the  value  he  defines  to  be 
value,  but  stability  of  something  else.  He  expresses 
his  present  position  most  fully  in  the  following  words. 
"The  article  chosen  for  that  standard,"  he  sslys,  "should 
place  both  debtors  and  creditors  in  exactly  the  same 
absolute,  and  the  same  relative,  position  to  each  other 
at  the  end  of  a  contract  that  they  occupied  at  its  begin- 
ning; this  implies  that  the  chosen  article  should  main- 
tain the  same  exchange -value  in  relation  to  goods, 
rents,  and  the  wages  of  labor  at  the  end  as  at  the 
beginning  of  the  contract,  and  it  implies  that  the  bor- 
rower and  lender  should  preserve  the  same  relative  posi- 
tion as  regards  their  fellow  producers  and  consumers  at 
the  later  as  at  the  earlier  point  of  time,  and  that  they 
have  not  changed  this  relation,  one  at  the  loss  of  the 
other"  (p.  92).     Consequently  he  now  attaches  much 


142  HISTORICAL    SURVEY 

importance  to  the  consideration  whether  a  change  in  the 
general  level  of  prices  is  due  to  forces  affecting  the  gold 
side  or  the  commodity  and  labor  side  of  the  balance 
(p.  93),  the  contrast  no  longer  being  between  gold,  or 
money,  on  the  one  side  and  commodities  on  the  other, 
but  between  gold  on  the  one  side,  and  on  the  other, 
both  commodities  and  labor  (cf.  p.  95) ;  and  what  he 
now  desires  in  money  is  that  it  shall  "maintain  the 
same  exchange -relations  and  the  same  level  of  prices 
with  labor  and  with  all  other  commodities"  (p.  97). 
And  accordingly  he  now  finds  fault  with  the  "multiple 
standard"  (the  commodity  standard)  for  not  including 
labor,  or  wages,  and  says  that  "if  the  price  of  labor 
were  to  be  given  its  relative  importance  in  a  Multiple 
Standard  for  recent  years,  it  might  appear  that  prices 
as  a  whole  had  not  fallen  at  all"  (p.  107).  So  he  now 
seems  to  be  trying  to  make  out  that  even  since  1873 
gold  has  remained  stable  in  exchange -value  —  that  is, 
in  exchange -value  extended  to  cover  an  esteem -value 
element  by  including  the  price  of  labor.  And  he  advo- 
cates such  a  mixed  standard,  on  the  ground  that  debtors 
are  not  the  only  ones  who  make  improvements  (ibid.). 
He  is,  however,  still  willing  to  allow  any  one  who 
prefers  it  to  use  the  "multiple  standard,"  confined 
to  commodities,  in  his  contracts  (p.  108) ;  and  even 
countenances  the  position  that,  whether  the  standard 
adopted  originally  favors  the  creditor  or  the  debtor, 
the  results  would  work  out  very  much  the  same  by 
means  of  an  adjustment  of  the  rate  of  interest  (pp. 
107-8);*  which  amounts  to  saying  that  after  all  the 
question  about  the  standard  is  not  of  much  consequence. 

*Cf.  note  on   p.  22  above,  in  which  this  position  was  advanced  by 
Professor  Clark. 


CONFUSED   ECONOMISTS  143 

A  few  more  instances  from  the  campaign  literature 
of  1895  may  be  cited.  In  Base  Coin  Exposed,  published 
at  Chicago  under  the  sobriquet  of  "Silas  Honest 
Money,"  Mr.  R.  W.  Knott  not  only  defined  "value"  as 
purchasing  power  over  "goods  or  services"  (p.  100,  cf. 
p.  175),  but  asserted  that  "labor  is  the  real  measure  of 
the  exchangeable  value  of  all  commodities"  (p.  74).* 
In  The  Great  Debate  (Chicago)  Mr.  R.  G.  Horr  said, 
"The  real  measure  of  value  is  human  toil"  (pp.  222, 
291);  which  seems  to  be  the  cost  standard  (cf.  p.  294). 
But  again  he  said,  "It  [the  market  value  of  gold]  is 
determined  by  comparing  it  with  all  the  other  products 
of  the  world"  (p.  426);  which  is  the  commodity  stand- 
ard. Then  also  he  said:  "As  gold  measures  the  value 
of  commodities,  wages  and  land,  so  wages,  lands  and 
commodities  measure  the  value  of  gold"  (p.  517) ;  which 
is  a  combination  of  the  wages  standard  and  the  com- 
modity standard,  plus  a  land  standard.  Another  writer 
even  succeeded  in  putting  both  these  standards  in  a 
single  sentence.  In  a  letter  reprinted  in  A  Dollar  worth 
a  Dollar  (New  York)  Mr.  T.  J.  Ford  asserted:  "All 
financiers  agree  that  the  highest  and  most  unerring 
standard  of  all  values  is  labor,  for  the  reason  that  the 
prices  paid  for  labor  .  .  .  measure  the  value  of  the 
output;  .  .  .  and  currency  ...  is  only  valuable 
for  the  amount  of  products  it  will  buy"  (p.  122).  In 
Money  and  Banking  (New  York)  Mr.  H.  White  wrote 
that  "when  we  speak  of  the  value  of  the  one  thing 
which  measures  all  values  we  mean  its  purchasing 
power  in  terms  of  those  commodities  whose  supply  is 
unlimited,  or  not  controlled  by  monopoly;"  and  that  "if 

*  Similarly  in  A  currency  catechism,  published  iu  the  same  year  at 
Louisville,  over  his  own  name,  p.  2. 


144  HISTORICAL    SURVEY 

gold  is  subject  to  fewer  changes  of  purchasing  power 
than"  anj'thing  else,  "it  is  better  fitted  to  serve  the 
purpose  of  money"  (p.  28).  Here  we  have  the  desid- 
eratum of  least  variableness  in  exchange -value  proper. 
But  in  a  later  passage  in  the  same  work  he  found  satis- 
faction in  a  general  fall  of  prices,  provided  it  be 
accompanied  by  a  rise  of  wages,  and  denied  that  such  a 
fall  of  prices  as  had  lately  taken  place  constituted — he 
said  "has  been  due  to" — "appreciation  of  gold,"  on  the 
ground  that  it  has  been  due,  in  every  particular  case,  to 
improved  facilities  in  producing  and  transporting  the 
articles  (pp.  109-10).  Here  we  have,  as  the  desidera- 
tum in  money,  constancy  in  cost -value,  the  desire  being 
that  the  cheapening  in  the  cost  of  goods  shall  manifest 
itself  in  a  corresponding  cheapening  of  their  prices.  In 
Coin  at  School  in  Finance  (Chicago  again)  Mr.  G.  E. 
Roberts  in  one  passage  most  explicitly  adopted  the  con- 
ception of  labor -value,  apparently  in  the  sense  of  cost- 
value,  saying:  "The  ideal  standard  of  value  is  the  pro- 
ductive value  of  manual  labor.  ...  If  a  man  bor- 
rows a  given  amount  of  money  it  is  essential  to  justice 
that  when  he  comes  to  pay  it  the  sum  shall  represent 
the  same  amount  of  labor  and  self-denial  that  it  did 
when  he  received  it.  If  this  is  the  case  the  lender 
receives  back  the  same  days'  works  that  he  advanced, 
plus  the  interest  agreed  upon,  and  the  transaction  is  as 
square  and  level  as  the  exchange  of  work  so  common 
among  our  farmers  in  harvest  and  threshing  time"  (pp. 
68-9).  But  again  he  said:  "When  the  little  money  that  I 
have  saved  and  put  at  interest  is  paid,  I  want  it  to  come 
back  with  substantially  the  same  purchasing  power  that 
it  had  when  I  loaned  it"  (p.  86).  In  this  he  probably 
referred  also  to  purchasing  power   over   labor;   but  he 


CONFUSED   ECONOMISTS  145 

could  not  exclude  purchasing  power  over  commodities, 
so  that  here  we  have  at  least  the  mixed  standard.  Later, 
when  he  became  Director  of  the  Mint,  Mr.  Roberts  con- 
fined himself  to  the  former  position,  but  in  both  its 
forms.  "Human  labor,"  he  now  said  in  his  Report  of 
1898,  "is  the  final  standard  by  which  "  gold  and  com- 
modities "are  rightlj'  measured"  (p.  573);*  and  conse- 
quently he  welcomed  a  fall  of  prices  due  to  improve- 
ments, "because  it  signifies  increased  purchasing  power 
in  the  people"  (pp.  573-4).  For  "if  a  given  amount  of 
labor  commands  as  much  gold  as  formerly,  but  through 
a  stable  relation  to  gold  commands  more  commodities, 
the  decline  in  the  latter  is  not  something  to  be  deplored  " 
(p.  574).  This  is  the  wages  standard.  Then  he  returned 
to  the  cost  standard,  saying:  "If  prices  fall  to  corres- 
pond with  improvements  in  production,"  or  again,  "If 
all  products  could  be  exchanged  on  the  basis  of  the 
labor  and  skill  required  to  produce  them,  and  all 
services  rendered  and  loans  contracted  upon  the  basis  of 
a  return  in  kind  of  day's  work  for  day's  work,  that 
would  seem  to  be  an  ideally  accurate  and  equitable 
arrangement"  (ibid.).  We  Americans  are  to  be  felici- 
tated on  having  a  government  that  can  instruct  us  in  an 
abstruse  scientific  question  where  doctors  disagree, 
although  its  instruction  might  be  more  effective  did 
its  official  instructor  only  agree  with  himself. 

Very  recently,  in  The  Evolution  of  Modern  Money, 
London,  1891,  Mr,  W.  W.  Carlile  says  that  because 
money  is  used  as  "a  store  of  purchasing  power,"  t  that 

•In  Annual  report  of  the  Secretary  of  the  Treasury  for  1898,  Wash- 
ington, 1898. 

tKather  curiously,  he  so  interprets  a  passage  in  Ashley's  Intro- 
duction to  English  economic  history  and  theory,  Vol.  I.  pp.  163-4,  which 
says  merely  that  one  use  of  money  is  as  "a  store  of  value." 


146  HISTORICAL    SURVEY 

money  is  best  which  best  subserves  this  end  (p.  187) .  But 
he  seems  to  conceive  of  this  end  being  subserved  by  any 
money  that  does  not  fall  in  purchasing  power  (cf.  p. 
272),  whatever  else  it  may  do;*  for  which  reason  gold 
is  viewed  as  a  better  standard  than  silver. 

§7.  The  inconsistency,  however,  has  not  been  con- 
fined to  the  advocates  of  the  gold  standard.  Even  a 
few,  but  only  a  few,  of  the  bimetallists  have  fallen  into 
confusion  on  this  subject,  which  is  of  such  fundamental 
importance  in  their  doctrine.  Thus  an  out-and-out 
bimetallist,  Mr.  John  A.  Grier,  in  Our  Silver  Coinage, 
and  its  relation  to  Debts  and  the  world-wide  Depression 
of  Prices,  Philadelphia,  1885,  twice  slipped  into  using  the 
labor  standard  as  alternative  with  the  commodity  stand- 
ard (pp.  39,  93),  although  the  subtitle  and  the  general 
tenor  of  the  work  (e.  g.  p.  47)  show  that  the  latter  was 
his  real  standard.  Then  Mr.  T.  B.  Buchanan  in  his  lit- 
tle treatise  on  the  Principles  of  Money  and  Coinage, 
Denver,  1894,  though  using  "value"  in  the  sense  of 
exchange -value  (pp.  14-15,  18-19),  and  definitely  stat- 
ing that  just  and  honest  money  must  have  as  its  prime 
requisite  stability  of  value  or  purchasing  power  (pp. 
35,  132),  yet  conceived  the  best,  because  the  most  easily 
regulated,  money  to  be  paper  notes  based  upon  labor, 
which  he  calls  "labor  note  money,"  the  unit  of  value 
being  a  unit  of  time  (an  hour  or  day)  of  labor,  classified 
according  to  skill,  and  such  money  being  payable  for 
products  to  the  amount  of  their  cost  in  hours  or  days  of 
toil  so  classified  (p.  134).  Such  money  would  be  stable 
in  cost -value,  and  therefore  not  necessarily  in  exchange- 


*  He  also  seems  to  use  the  idea  of  cost-value  against  the  idea  of 
exchange-value,  pp.  .311-l.T;  and  he  speaks  of  appreciation  of  gold  as 
happening  only  during  a  panic,  p.  315. 


CONFUSED   ECONOMISTS  147 

value  or  purchasing  power,  unless  allowance  were  made 
in  the  classification  for  variations  in  the  efficiency  of 
labor.  Indeed  such  money,  without  this  allowance, 
would  advance  in  exchange -value  or  purchasing  power 
as  progress  takes  place  in  cheapening  the  labor -cost  of 
goods;  and  with  this  allowance,  the  system  would  only 
be  a  clumsy  means  of  securing  money  based  upon  a  unit 
of  value  identified  with  a  unit  of  commodity,  that  is, 
stable  in  exchange -value  proper.  But  most  surprising, 
and  most  regrettable,  is  the  deviation  made  by  one  of  the 
greatest  bimetallists,  and  one  of  the  greatest  economists 
of  recent  times. 

Throughout  his  many  works  F.  A.  Walker  frequently 
defined  "value"  simply  as  "purchasing  power,  or  power 
in  exchange;"*  but  when  he  gave  a  formal  definition  of 
it,  he  expanded  the  terra  "purchasing  power"  to  power 
of  commanding  in  exchange  "the  labor,  or  the  products 
of  the  labor,  of  others."!  His  standard  of  value  in 
deferred  payments  would  then  seem  to  be  properly  com- 
posed of  prices  (of  commodities)  and  wages.  But  in  his 
earliest  work  on  the  subject  he  in  one  place  said  the 
repayment  should  be  made  in  the  same  cost  of  pro- 
duction,! and  in  another  place  treated  of  contracts  as 
virtually  calling  for  so  many  "days'  labor,"  I|  which 
seems  to  be  the  wages  standard.  Throughout  his 
works,  also,  the  idea  of  cost -value  recurs;  for  in  the 
later  two  he  recommended  wheat  as  the  best  standard 
over  long  periods  because  of  the  greater  stability  of  its 
cost  of  production,**    In  certain  passages,  however,  he 

*  Money  in  its  relations  to  trade  and  indiistnj,  New  York,  1879,  p. 
36;  Political  economy,  New  York,  1887,  pp.  82,  131. 
t  Political  economy,  pp.  5,  81,  84-5. 
t  Mo»ey,  New  York,  1877,  p.  36.        ||  Thid.  p.  90. 
**  Money,  trade  and  industry,  p.  68:   Political  economy,  p.  142. 


148  HISTORICAL    SURVEY 

simply  wanted  the  standard  of  deferred  payments  to 
place  the  creditor  in  the  same  position  "  with  respect  to 
the  purchasable  wealth  of  society,"*  or  objected  to  the 
adoption  of  the  single  gold  standard  as  having  increased 
the  "purchasing  power"  of  money ;t  but  as  he  included 
labor  among  the  articles  purchasable,  he  interpreted  this 
as  meaning  that  that  adoption  caused  to  laborers  greater 
difficulty  in  paying  their  debts. t  Yet  again  he  was  in 
general  favorable  to  the  scheme  of  paying  debts  accord- 
ing to  the  "multiple  standard,"  which  only  includes  com- 
modities. 1 1  But  in  one  passage  he  showed  that  he  was 
willing  to  adopt  this  standard,  not  because  it  is  the 
proper  standard  of  exchange -value,  but  because  there  is 
probability  that  among  a  large  list  of  commodities  the 
rise  of  some  in  "value"  will  be  compensated  by  the  fall 
of  others  in  "value."**  The  "value"  here  can  only 
mean  cost-value  or  esteem-value,  which  is  therefore  the 
real  invariable  quantity  he  had  in  mind.  Yet,  lastly, 
one  of  his  recommendations  of  bimetallism  is  that  it  is 
likely  to  give  a  better  standard  for  deferred  payments, 
because  of  its  compensatory  action  in  throwing  the 
demand  from  the  rising  to  the  falling,  or  from  the  less 
falling  to  the  more  falling,  metal. ft  But  no  analysis  of 
this  action  can  show  it  to  cause  greater  likelihood  of 
steadiness  in  any  value  except  exchange -value,  or  pos- 
sibly esteem  value.    . 


*Money,  trade  and  industry,  p.  62. 

^Ibid.  p.  191.  Xlhid.  p.  193. 

\\Ihid.  pp.  70-77;  Political  economy,  pp.  142-3,  371-5. 
**  Mo7iey,  trade  and  industry,  p.  71.     Remember  Senior. 
a- International  bimetallism.  New  York,  1896,  pp.  148-9. 


VARYING   ECONOMISTS  149 


CHAPTER  VI 

ECONOMISTS  WHO  HAVE  PASSED  FROM  THE  ONE  TO 
THE  OTHER  STANDARD 

§1.  Slightly  different  from  the  preceding  economists 
who  are  confused  between  the  different  standards  and 
the  different  kinds  of  value  in  the  same  work  or  works, 
are  those  economists  who  have,  in  separate  works, 
passed  from  one  standard  to  another  without  appearing 
to^ecognize  that  they  have  made  a  change.  The  course 
pursued  is  generally  from  the  doctrine  of  exchange- 
value  to  the  doctrine  of  one  of  the  two  labor -values. 
It  would  seem  as  if  the  use  of  the  term  "exchangeable 
value  "  is  strong  enough  at  the  start  to  put  these  econ- 
omists on  the  track  of  exchange -value;  but  that  after- 
wards gradually  the  influence  of  the  labor  theories  of 
value  —  theories  explaining  relative  values  in  some  way 
by  means  of  labor — gains  strength  enough  to  deflect 
them  into  the  other  directions. 

An  early  example  of  change  of  opinion  is  presented 
by  Germain  Gamier.  In  the  notes  which  he  added  in 
the  fifth  volume  of  his  translation  of  Adam  Smith,  pub- 
lished in  1802,  Count  Gamier  conceived  of  the  "value" 
of  money,  and  even  of  its  "real  value,"  as  measured 
solely  by  the  quantity  of  commodities  it  would  purchase, 
and  as  varying  inversely  with  the  level  of  prices;  and 
held  that  debts  ought  to  be  paid  in  an  equal  amount  of 
purchasing  power  over  commodities  as  was  originally 
consigned  by  the  lender  to  the  borrower  (pp.  428-34). 
Nothing  could  be  more  explicit  in  favor  of  the  idea  that 
money  is  a  measure   of,   and   ought   to    be   stable   in, 


150  HISTORICAL   SURVEY 

exchange -value  proper.  And  yet  this  author,  raany 
years  later,  reverted  to  the  labor- cost  standard  in  com- 
paring the  "value"  of  silver  in  antiquity  with  its 
"value"  in  his  day.*  But  for  practical  reasons,  like  so 
many  others,  he  used  the  price  of  wheat,  asserting, 
rather  inconsequentially,  that  wheat  is  the  article  stablest 
over  long  periods  in  "intrinsic  value"  (defined  exactly 
like  Adam  Smith's  "exchangeable  value"  and  "wealth  ") 
because  in  its  production  human  labor  plays  the  least 
part,  the  mysterious  labor  of  Nature  doing  most  of  the 
work,  and  also  because,  as  it  is  the  principal  subsistence 
of  the  laborers,  it  naturally  regulates  the  value  of  labor 
and  its  products.! 

§  2.  In  England,  a  few  years  after  the  death  of 
Ricardo,  a  couple  of  anonymous  works, t  known  to  be 
by  Samuel  Bailey,  made  some  stir  because  of  their  acute 
criticism  of  Ricardo's  conception  of  labor-cost  as  the 
standard  of  value,  although,  as  we  shall  see,  similar 
criticism  had  been  made  by  Colonel  Torrens  during 
Ricardo's  lifetime.  In  the  first  and  longest  of  these 
two  works,  Bailey  conceded  to  Ricardo  that  in  some 
cases  (forming  one  of  three  classes  into  which  all  prod- 
ucts may  be  divided,  p.  185)  tlie  labor-cost  regulates 
the  relative  values  of  two  or  more  commodities  in  a 
given  place  at  a  given  period;  but  he  denied  that  the 
labor-cost  of  a  single  commodity  regulates  its  value 
through  the  course  of  time.  Abiding  by  Ricardo's  own 
definition  of  "value"  as  "the  power  of  purchasing  other 


* Mhnoire  sur  la  valeur  des  monnaies  de  compte  ches  les  peuples  de 
VantiquiU,  Paris,  1817,  p.  43. 

ilhid.  pp.42,  43-4. 

XA  critical  dissertation  on  the  nature,  measure,  and  causes  of  value, 
chiefly  in  reference  to  the  writings  of  Air.  Ricardo  and  his  followers, 
London,  1825;  A  letter  to  a  political  economist,  London,  1826. 


VARYING   ECONOMISTS  151 

goods,"  he  maintained  that  if  one  commodity  remains  of 
the  same  cost,  while  others  are  produced  with  one-half 
the  labor  formerly  required,  that  one  article  rises  in 
"value,"  because,  by  the  Ricardian  doctrine  of  relative 
values,  it  comes  to  exchange  for  more  of  the  other 
articles  (pp.  6,  10-11);  while,  if  all  commodities  were 
equally  improved  in  their  costs  of  production,  "the 
value  of  each  individual  commodity  would  remain  as 
before"  (p.  154).  He  summed  up  his  criticism  in  the 
second  work  thus:  "The  right  conclusion  from  his 
[Ricardo's]  doctrine,  which  affirms  labor  to  be  the  sole 
regulating  principle  of  value,  is,  that  two  commodities 
would  always  be  of  the  same  value  in  relation  to  each 
other,  so  long  as  they  required  the  same  labor  to  pro- 
duce them;  but  Mr.  Ricardo,  losing  sight  of  relativeness 
in  the  term  value,  concluded  that  one  commodity,  with- 
out reference  to  any  other,  would  be  always  of  the  same 
value,  if  produced  by  the  same  labor;  and  hence  that  a 
thing  would  increase  or  decrease  in  this  property  of 
value,  not  in  relation  to  other  commodities,  but  consid- 
ered by  itself,  in  proportion  as  it  required  more  or  less 
labor  for  its  production."*  Bailey's  own  view  was  that 
the  comparison  of  the  value  of  a  thing  at  one  time  with 
its  value  at  another  is  "not  a  comparison  of  some  in- 
trinsic quality  at  one  period,  with  the  same  quality  at 
another  period;  but  a  comparison  of  ratios,  or  a  com- 
parison of  the  relative  quantities  in  which  commodities 
exchanged  for  each  other  at  two  different  periods."! 
Here  we  have  a  perfect  account  of  exchange -value,  with 
emphasis  upon  its  correlativity.  But  unfortunately  it 
is   only  a  limited  account  of  exchange -value.     Bailey 


*  Letter,  pp.  53-4;  cf.  Dissertation,  pp.  9-10,  17-18. 
f  Dissertation,  pp.  72-3. 


152  HISTORICAL    SURVEY 

does  not  rise  above  the  conception  of  particular 
exchange -values,  forms  no  conception  of  general  ex- 
change-value, and  so  denies  that  the  "value"  of  a 
thing  can  be  compared  with  itself  at  different  periods, 
or  that  there  can  be  a  measurement  of  "value"  through 
the  course  of  time.*  This  defect  had  important  conse- 
quence. For  about. ten  years  later  he  devoted  attention 
to  the  good  and  bad  effects  which  flow  from  variations 
in  the  "value"  of  money  through  the  course  of  time  — 
the  very  thing  which  he  had  before  denied  to  be  meas- 
urable or  even  conceivable.  In  the  work  treating  of 
this  subject  t  he  seems  to  rise  to  the  conception  of  gen- 
eral exchange -value;  for  he  speaks  of  "a  general  rise 
of  prices"  being  the  same  as  "a  fall  in  the  value  of 
money"  (pp.  46-7,  cf.  p.  14).  But  notwithstanding 
this,  and  although  he  remarks  upon  the  importance  of 
money  being  stable  in  "value,"  t  presumably  in  this 
sense,  he  now  departs  from  this  position,  and  reverts  to 
another  conception  of  value.  In  his  first  work,  near 
the  commencement,  he  had  spoken  of  "value,  in  its 
ultimate  sense,"  as  "appearing  to  mean  the  esteem  in 
which  any  object  is  held,"  a  phrase  which  Malthus 
turned  to  his  own  purposes  against  Bailey.  1 1  Bailey 
now  reverted,  not  so  much  to  this,  as  to  the  allied  con- 
ception of  cost- value.  He  did  so  by  distinguishing 
between  a  change  in  the  "value"  (exchange -value)  of 
money  originating  on  its  side,  and  a  change  in  its 
"value"  originating   on  the  side  of  commodities  (pp. 

*Ihid.  Chapt.  VI. 

i  Money  and  its  vicissitudes  in  value  as  they  affect  national  industry 
and  pecuniary  contracts ,  London,  1837. 

t  Not  in  its  capacity  as  a  measure  of  value,  but  in  its  capacity  as  "the 
medial  commodity,"  pp.  8-10,  13. 

y  Malthus's  Definitions  in  political  economy,  Chapt.  VIII. 


VARYING    ECONOMISTS  153 

16-17).  His  meaning  comes  out  clearest  in  the  exami- 
nation of  the  relations  between  creditors  and  debtors. 
This  he  conducted  through  four  suppositional  cases: 
when  money  (1)  rises  or  (2)  falls  in  "value"  [both  ex- 
change-value and  cost-value],  its  cost  rising  or  falling, 
while  the  costs  of  commodities  remain  unchanged;  and 
when  money  (3)  rises  or  (4)  falls  im" value"  [exchange- 
value,  but  remains  unchanged  in  cost- value],  its  cost 
remaining  the  same,  while  the  costs  of  commodities  fall 
or  rise.  He  concluded  that  in  cases  (1)  and  (2)  there  is 
injustice  between  the  parties,  and  that  in  such  cases 
contracts  ought  to  be  paid  in  the  same  "value"  [which 
is  both  the  same  exchange -value  and  the  same  cost- 
value]  ;  but  that  in  cases  (3)  and  (4)  there  is  no  reason 
why  the  creditors  should  not  share  in  the  gains  and 
losses  which  these  conditions  bring  upon  society  (pp. 
112-22).  It  is  plain  that  in  these  latter  cases  his  desire 
was  that  contracts  should  be  paid  in  altered  exchange- 
value,  but  in  the  same  cost -value.  He  therefore  ob- 
jected to  the  scheme  of  regulating  the  payment  of  debts 
by  the  multiple  standard  (Lowe's  and  Scrope's  scheme, 
to  be  noticed  presently),  not  only  because  of  certain 
practical  difficulties,  but  because  according  to  it  the 
lender  would  always  receive  back  only  the  same  quantity 
of  goods  whether  produced  with  more  or  with  less  labor, 
ajid  so  might  lose  in  command  over  labor;  and  he  con- 
sidered the  scheme  to  be  right  only  when  the  change  in 
the'Walue "  of  money  originates  in  the  money,  but  if 
the  change  originates  in  the  commodities,  the  repay- 
ment, he  thought,  ought  to  leave  the  contraetants  to 
their  natural  proportions  of  gain  and  loss  (pp.  165-8). 
This  last,  and  some  other  allusions,  point  to  the  idea 
that  the  creditor  and  debtor  should  share  between  them 


154  HISTORICAL    SURVEY 

the  gain  or  loss  on  the  loan;  which  means  that  labor 
should  form  only  part  of  the  standard,  in  conjunction 
with  commodities.  But  it  may  mean  merely  that  the 
creditor  should  share  with  the  debtor  in  the  general 
advance  or  retrogression  of  prosperity,  by  getting  all 
the  commodity  gain  or  loss  on  the  loan  itself,  leaving 
to  the  debtor  to  get  his  share  from  his  own  capital  and 
industry;  which  is  in  accordance  with  the  cost  stand- 
ard. This,  certainlv,  is  the  position  taken  in  the  analysis 
of  the  four  suppositional  cases.  Thus  Bailey  reverted 
to  Ricardo's  attitude  toward  the  "value"  of  money 
through  the  course  of  time,  although  he  did  not  adopt 
Ricardo's  phraseology,  and  so  avoided  Ricardo's  con- 
fusion, but  instead,  through  the  defectiveness  of  his  own 
phraseology,  committed  the  inconsistency  of  saying  that 
money  ought  to  be  stable  in  "  value  "  and  at  the  same 
time  wanting  it,  in  certain  circumstances,  to  vary  in  the 
only  "value"  for  which  he  had  a  term,  his  only  justifi- 
cation being  that  money  would  then  be  stable  in  another 
kind  of  value  for  which  he  had  no  term.* 

§3.  After  the  gold  inundation  of  the  50ties  the 
ensuing  rise  of  prices  attracted  the  attention  of  a  person 
who  soon  became  one  of  the  greatest  of  modern  econ- 
omists. In  1863  Jevons  published  A  Serious  Fall  in  the 
Value  of  Gold  ascertained,    and  its   Social   Effects   set 


•Somewhat  the  same  criticism  of  Ricardo  as  Bailey's,  with  a  similar, 
but  more  consistent  reversion  to,  or  rather,  in  this  case,  retention  of, 
Ricardo's  real  position,  all  in  one  book,  was  made  by  Ch.  F.  Cotterill,  in 
An  examintition  of  the  doctrines  of  value  as  set  forth  by  Adam  Smith, 
Ricardo,  McCulloch,  Mill,  etc.,  being  a  reply  to  those  distinguished 
authors,  London,  1831.  For  the  criticism  of  Ricardo  see  especially  pp. 
8-12,  125.  Recognizing  that  for  money  to  be  stable  in  exchange-value  it 
would  have  to  vary  in  cost  with  the  average  of  commodities,  p.  120,  he 
wanted  it  to  be  stable  in  cost,  pp.  105,  115,  122. 


FARTING    ECONOMISTS  155 

forth.*  In  this,  and  iu  other  works  written  during  that 
peidod  of  abundance  of  gold,  he  consistently  used  the 
term  "value"  in  the  sense  of  exchange -value  proper, 
and  continued  to  use  it  in  this  sense  in  his  later  writ- 
ings. Thus  in  that  first  work  he  wrote  that  "value  is  a 
vague  expression  for  potency  in  purchasing  other  com- 
modities" (p.  20),  and  that  in  the  case  of  gold  money, 
"if  prices  on  the  average  have  risen  ever  so  little,  this 
constitutes  a  fall  in  the  value  of  gold"  {ibid.),f  or  that 
if  the  prices  of  commodities  rise  on  the  average  higher 
than  the  price  of  silver,  "this  fact  constitutes  deprecia- 
tion of  silver"  (p.  62) ;  and  he  expressly  denied  that 
the  question  about  a  change  in  the  value  of  gold  is  to 
be  determined  by  considering  whether  the  cause  lies  on 
the  gold  side  or  on  the  commodity  side,  although  the 
settlement  of  the  former  question  may  help  to  determine 
the  latter  (pp.  18-19).  A  little  later  he  said:  "In  an 
economic  sense,  the  values  of  two  things  merely  express 
the  ratio  in  which  they  do  as  a  fact  exchange  for  each 
other."  t  And  so  in  his  Theory  of  Political  Economy, 
first  published  in  1871,  he  laid  down  this  definition: 
"The  word  Value,  so  far  as  it  can  be  correctly  used  [in 
connection  with  a  commodity] ,  merely  expresses  the  cir- 
cumstance of  its  exchanging  in  a  certain  ratio  for  some 
other  substance"  (p.  82). ||     In  the  second  edition  of 


*  Reprinted  in  Investigations  in  currency  aud  finance,  London,  1884, 
pp.  13-118.     References  are  to  tliis. 

tCf.  The  depreciation  of  gold,  1869,  in  Investigations,  p.  154,  and 
Money  and  the  mechanism  of  exchange,  London,  1875,  p.  315. 

t  On  the  condition  of  the  gold  coinage  of  the  United  Kingdom,  etc. 
1868,  in  Investigations,  p.  251. 

II  In  the  second  ed.  pp.  83-4.  Cf.  "The  word  value  only  means  that 
so  much  of  one  thing  is  given  for  so  much  of  the  other,"  Primer  of 
political  economy,  London,  1878,  fourth  ed.  p.  98. 


156  HISTORICAL    SURVEY 

this  work,  1879,  he  distinguished  between  three  mean- 
ings of  the  "vague"  term  "value,"  as  "value  in  use," 
"esteem,  or  urgency  of  desire,"  and  "ratio  of  exchange" 
(p.  85).  Here,  as  already  in  the  first  edition  of  this 
work,  he  declared  his  intention  to  discontinue  using 
the  word  "value"  and  to  substitute  in  its  place  the 
expression  "ratio  of  exchange."*  Needless  to  say,  he 
did  not  abide  by  this  resolution  even  in  this  work  itself; 
but  he  did  confine  himself  pretty  successfully  to  using 
the  term  "value  "  in  the  sense  of  ratio  of  exchange.!  In 
his  early  statistical  investigations  into  variations  in  the 
exchange -value  of  gold,  he  expressly  asserted  that  the 
special  causes  of  the  variations  in  the  prices  of  particu- 
lar articles  should  not  be  considered,  partly  on  the 
ground  that  the  principle  of  probability  would  lead  us 
to  place  the  single  adequate  cause  in  money,  if  there  is 
a  general  change  in  prices  in  the  same  direction ;  X  and 
parti}'  because,  whatever  be  such  special  causes,  "the 
result  would  none  the  less  be  an  alteration  in  the  pur- 
chasing power  or  value  of  gold."  II  Jevons  recognized 
that  the  general  fall  of  prices  which  had  preceded  the 
gold  discoveries  was  to  be  explained  by  supposing  that 
"while  modes  of  procuring,  raising  and  making  other 
articles  more  easily  and  cheaply  were  constantly  being 
discovered,  no  such  great  improvements  took  place  in 
the  procuring  of  the  precious  metals ; "  **  and  he  argued 

«In  first  ed.  p.  83;  in  third  ed.  1888,  p.  81. 

f  E.  (J.  "Value  is  only  the  ratio  of  quantities  exchanged,"  Money,  etc. 
p.  15,  cf.  pp.  11-12,  08. 

X  Investigations,  pp.  58,  155-6,  cf.  p.  22. 

\\Ihid.  p.  15G,  cf.  pp.  21,  58-9. — A  fact,  ascertained  by  observation 

and  measurement,  is  not  altered  by  the  causes  we  may  assign  for  it,  so 

that,  after  all,  the  question   of  probability  is   excluded,  so  far  as  that 

question  is  about  the  cause  of  the  variation  and  not  about  the  fact  of  it. 

**  Ibid.  p.  110;   similarly  again  pp.  131-2. 


VARYING    ECONOMISTS  157 

that  the  gold  discoveries  had  "a  considerable  effect  in 
reversing  the  previous  course  of  prices,"*  by  throwing 
the  greater  cheapening  of  production  on  the  side  of 
gold.  At  this  time  also  he  considered  this  reversion 
a  temporary  accident,  and  affirmed  that  "the  normal 
course  of  prices  in  the  present  progressive  state  of 
things  is  downward,"  the  improvements  in  production 
falling  naturally  more  upon  commodities  in  general  than 
upon  the  precious  metals. t  In  other  words,  he  expected 
that  in  the  future  the  exchange-value  of  gold  and  silver, 
articles  produced  with  decreasing  returns,  would  nor- 
mally rise,  or  appreciate.  On  account  of  this  variability 
of  the  exchange -value  of  the  precious  metals,  he  con- 
sidered them  imperfect  instruments  to  serve  as  the 
standard  of  value  in  deferred  payments  and  as  the 
store  of  value,  and  desired  that  these  functions  of 
money  should  be  separated  from  its  functions  as  a 
medium  of  exchange  and  as  a  measure  of  contemporary 
values.!  So  long  as  this  is  not  done,  he  is  as  explicit 
as  possible  in  saying  that  what  is  desirable  in  money  is 
the  greatest  possible  approach  toward  stability  in  ex- 
change-value, expressing  himself  to  the  effect  that  "the 
ratios  in  which  money  exchanges  for  other  commodities 
should  be  maintained  as  nearly  as  possible  invariable 
on  the  average."  1 1  As  for  the  separation  of  the  func- 
tions, it  is  well  known  that  Jevons  revived  Lowe's  and 
Scrope's  scheme  (which  we  have  just  seen  condemned 
by  Bailey) ,  and  urged  its  adoption  in  almost  exactly  the 


*  Ibid.  p.  138. 
fibid.  p.  158;  cf.  p.  138. 

XAn  ideally  perfect  system  of  currency,  an  unpublished  chapter  for 
his  book  Money,  etc.,  in  Investigations,  p.  297. 
II  Money,  etc.,  p.  38;   similarly  p.  13. 


158  HISTOBICAL    SUBVET 

same  way  those  authors  had  suggested  it.*  Thus  in  all 
his  theoretical  writings  Jevons  was  an  advocate  of  sta- 
bility of  money  in  exchange -value. 

But  now  a  change  takes  place.  After  the  adoption 
of  the  single  gold  standard  by  several  countries  in  1873, 
prices  took  a  downward  turn  again,  and  the  "battle  of 
the  standards"  began.  It  is  noticeable  that  when  Je- 
vons touched  upon  the  bimetallic  question  the  whole 
character  of  his  work  changes,  and  his  scientific  interest 
seems  to  give  way  to  practical  interests.  Thus  he  now 
pronounced  gold  to  be  more  likely  to  be  stable  in 
"value"  than  silver,  on  the  ground  that  silver  is  pro- 
duced in  a  more  regular  industry,  "so  that  the  advance 
of  mechanical  and  metallurgical  science  tends  to  cheapen 
it  in  the  same  way  (though  not  in  so  great  a  degree)  as 
it  has  cheapened  iron  and  steel. "t  Here  he  fears  the 
"cheapening"  of  silver,  forgetting  that  this  is  cheapen- 
ing of  cost-value,  and  not  necessarily  of  exchange- 
value,  especially  if  the  advance  of  science  cheapens 
other  things  more,  as  he  admits  it  does  in  the  case  of 
iron  and  steel.  As  he  had  before  said  the  tendency  of 
science  is  to  cheapen  most  things  more  than  gold  and 
silver,  it  would  follow  that  if  silver  is  likely  to  be 
cheapened  more  than  gold,  silver  is  likely  to  lag  behind 
other  things  less  than  gold,  that  is,  silver  is  likely  to 
appreciate  less  in  exchange -value,  and  so  to  keep  nearer 
to  the  stability  in  exchange-value  before  desired,  than 
gold.  But  he  now  abandons  his  former  position  that 
the  "normal  course"  of  prices  (in  gold  and  silver)  is 
downwards,  and  expects  continued  "depreciation"  of 
the  precious  metals,  but  mostly  of  silver,  even  in  the 

*  Ihid.  pp.  328-33. 

\The  silver  question,  1877,  in  Investigations,  p.  311. 


FARTING    ECONOMISTS  159 

sense  of  a  fall  in  exchange -value,  on  the  ground  that 
this  has  been  the  course  of  things  since  the  discovery  of 
America  four  centuries  ago,*  and  since  the  discoveries 
of  gold  in  California  and  Australia  two  decades  ago.t 
In  one  passage  he  says  the  precious  metals  are  less  sat- 
isfactory as  standards  of  value  than  many  other  com- 
modities, "such  as  corn,"  because  "their  value  has 
suffered  and  is  suffering  an  almost  continuous  decline, 
owing  to  the  progress  of  industry,  and  the  discovery  of 
new  mechanical  and  chemical  means  for  their  extrac- 
tion." t  Here  no  reference  is  made  to  the  improvements 
in  the  production  of  other  things, ||  and  no  attempt  to 
determine  on  which  side  the  improvements  are  the  more 
rapid.  What  he  has  in  mind,  therefore,  is  really  only 
"depreciation"  in  cost- value,  although  he  treats  it  as 
depreciation  in  exchange -value,  and  thereby  reverses  his 
former  position  —  reverses  it,  however,  without  any 
reason  except  what  comes  from  this  confused  substitu- 
tion of  the  idea  of  cost -value  for  that  of  exchange- 
value.**  Also  in  two  passages  he  seems  to  have  in  mind 
depreciation  in  esteem- value. tt  Thus  in  his  defense  of 
the  single  gold  standard,  he  departed  from  his  definite 


*Ibid.  pp.  312;  Bimetallism,  1881,  ibid.  p.  319;  and  Common  sense 
ideas  abotit  money,  a  posthumous  fragment,  ibid.  p.  358. 
\  Money,  etc.  p.  143.  tibid.  p.  42. 

II  In  Investigations,  p.  321,  he  makes  the  opposite  mistake  of  attribut- 
ing an  earlier  fall  of  prices  entirely  to  what  happened  to  commodities, 
without  reference  to  what  was  happening  to  money. 

**He  even  went  so  far  as  to  say  that  "the  values  of  gold  and  silver 
are  ultimately  governed,  like  those  of  all  other  commodities,  by  the  cost 
of  production,"  Investigations,  p.  318,  cf.  p.  351,  forgetting  what  he  had 
said  in  his  Theory  of  political  economy,  that  "the  ratio  of  exchange  gov- 
erns the  production  as  much  as  the  production  governs  the  ratio  of 
exchange,"  p.  183. 

iflbid.  pp.  184,  187,  speaking  of  the  "value"  of  gold  falling  while 
wealth  increases. 


160  HISTORICAL   SURVEY 

principle  that  "value"  means  only  exchange -value,  or 
ratio  of  exchange,  and  that  money  should  be  stable  in 
this,  and  went  over  to  the  vaguely  expressed  idea  that 
money  should  be  stable  in  cost-value  or  esteem -value.* 
§4.  An  economist  whose  first  work  dates  back 
before  Jevons's,  Mr.  H.  D.  Macleod,  was  one  of  the 
earliest  protestors  in  England  against  the  influence  of 
Ricardo,  and  most  completely  demolished  the  cost-of- 
production  theory.  He  therefore  gave  up  all  idea  of 
"value"  being  cost-value,  or  even  esteem-value,  and 
adhered  literally  to  the  position  that  in  economics 
"value"  means  only  exchange- value. t  It  is  true,  he 
generally  included  services  among  the  things  an  article 
can  be  exchanged  for;  but  by  "service"  he  seems  to 
mean  an  immaterial  product  of   labor,   and   not  labor 


*  It  must  be  noticed,  however,  that  Jevons  never  adopted  the  posi- 
tion which  we  shall  see  assumed  by  the  next  writer  here  reviewed,  and 
which  is  held  by  so  many  recent  economists,  of  avowedly  asserting  that 
a  general  fall  of  prices  constitutes  stability  in  the  "value"  of  money, 
when  due  to  falls  in  the  cost-values  of  goods.  He  really  maintained 
that  whatever  general  fall  of  prices  had  taken  place,  before  bis  death, 
was  temporary  (cf.  Investigations,  pp.  321,  355),  and  that  a  general  fall 
of  prices  would  not  take  place,  in  other  words,  that  gold  would  not 
appreciate  in  exchange-value.  In  this  he  was  consistent  with  his  earlier 
position  in  conception.  He  changed  his  earlier  position  in  expectation  of 
facts.  But  this  change  was  itself  due  to  a  deterioration  in  theory,  as  he 
ceased  to  compare  the  cheapening  in  cost  of  the  precious  metals  with  the 
cheapening  of  other  commodities,  and  so  fell  into  a  treatment  of  the 
subject  which  is  proper  only  for  persons  who  conceive  of  "value"  as 
cost-value  or  esteem-value.  He  did  this  also  when  he  preferred  gold  to 
silver  on  the  ground  that  it  is  likely  to  "cheapen"  less,  since  this  makes 
steadiness  of  cost  the  aim.  It  is  for  these  reasons  that  Jevons  cannot 
be  placed  among  those  who  hold  pure  and  undefiled  the  doctrine  that 
money  should  be  stable  in  exchange-value,  in  spite  of  the  fact  that  this 
was  his  always  avowed  theoretical  position. 

f  Elements  of  political  economy,  London,  1858,  pp.  51-2  (to  be 
referred  to  as  E);  Theory  and  practice  of  hanking,  London,  third  ed. 
revised,  1875,  Vol.  I.  p.  65  (to  he  referred  to  as  B). 


VARYING    ECONOMISTS  161 

itself;  for  he  tells  iis  it^  is  not  labor,  but  only  the  result 
of  labor,  that  has  value  (^.  pp.  53,  128;  B.  I.  p.  104). 
He  expressly  rejects  the  cost  standard,*  and  the  wages, 
standard  {E.  p.  1G5).  He  also  expressly  says  that 
money  rises  or  falls  "  in  value  in  the  inverse  proportions 
in  which"  quantities  of  it  "will  exchange  with  other 
things,"  or  that  "the  value  of  money  varies  inversely  as 
price,"  t  and  speaks  of  the  "value  of  coins"  as  "the 
power  of  purchasing,  or  exchanging  for,  other  things" 
iC.  p.  509),  and  of  gold  var^'ing  in  "value"  as  it  varies 
in  "purchasing  power"  iC.  p.  111).  He  is  even  so 
enamored  of  this  idea  as  to  think  that  the  old  term 
"extrinsic  value,"  used  in  connection  with  coins  (which 
meant  what  he  calls  "nominal  value"),  could  only  mean 
exchange- value  {B.  I.  p.  390,  G.  p.  443).  He  is  also 
one  of  those  who  recognize  the  principle  that  there  can 
not  be  a  general  rise  or  fall  of  the  "values  "  of  all  things 
{B.  I.  p.  70,  C.  p.  176) ;  which  we  know  to  be  true  only 
of  exchange- values,  A  certain  proposition  runs  through 
all  his  works,  to  the  effect  that  if  the  quantity  of  money 
changes  always  in  exact  proportion  with  the  quantity  of 
debts  (or  capital),  no  change  will  take  place  in  its 
"value;"  t  and  again,  in  one  place,  it  is  asserted  that  if 
commodities  multiply  faster  than  the  paying  medium, 
their  prices  fall  (C.  p.  857).  Wg_therefore  seem  to  be 
in  a"  position  to  know  what  he  meant  when  he  aflSrmed 
iji^his  earliest  work:  "The  first  requisite  of  any  sub- 
stance used  as  a  currency  is  steadiness  in  value,  and 
just  as  that  steadiness  approximates  to  invariability,  the 


*Tlieory  of  credit,  London,  second  ed.  1893,  p.  213  (to  be  referred  to 
as  C). 

fE.  p.  83;  and  so  B.  I.  p.  43,  C.  p.  113. 

tE.  p.  161,  cf.  423;  B.  II.  pp.  244-5;  C.  pp.  110-11. 


162  HISTORICAL    SURVEY 

more  desirable  it  becomes,"  even  though  he  added  that 
this  substance  "should  always  be  able  to  purchase  the 
same  amount  of  service"  {E.  p.  155).  Unfortunately, 
however,  from  the  beginning,  Mr.  Macleod  rejected  the 
possibility  even  of  conceiving  of  any  article  remaining 
invariable  in  general  exchange -value  while  all  others 
vary,*  and  proclaimed  the  futility  of  seeking  to  obtain 
any  currency  with  stable  value  {E.  p.  1G5,  G.  p.  177). 
Consequently  he  became  indifferent  to  this  quality  in 
money,  in  spite  of  having  called  it  the  "first  requisite." 
And  now  in  the  chapter  of  his  last  work,  dealing  with 
bimetallism,  which  has  been  separately  published,  he 
rejects  the  testimony  as  to  the  recent  appreciation  of 
gold  presented  by  the  commodity  standard  of  index- 
numbers,  on  the  ground  partly  that  the  prices  can  indi- 
vidually be  accounted  for  as  falling  because  of  improved 
production  and  transportation  of  the  articles,  partly  that 
there  has  been  a  rise  of  wages,  and  partly  that  the  rate 
of  interest  has  fallen  (C  pp.  538-9).  He  even  says 
that  "a  change  in  prices,  or  the  value  of  commodities," 
may  take  place  from  a  change  in  the  commodities,  with- 
out a  change  in  the  currency  {€.  p.  744),  with  obvious 
implication  that  this  change  in  commodities  is  a  change 
in  their  "values,"  thus  allowing  a  general  change  of 
"values,"  before  denied,  and  allowing  gold  to  be  stable 
in  "value,"  although  all  gold  prices  fall.  Evidently  he 
now  has  in  mind  cost-value,  of  which  alone  (or  of 
esteem -value)  these  statements  are  true. 

Still  another  change  has  been  made  by  Sit;  Robert 
Giffen.  From  1872  when  he  wrote  about  the  preceding 
period,  down  to  the  present,  this  statistician  has  con- 
sistently   identified  "depreciation"  and  "appreciation" 

*E.  p.  163;  B.  I.  p.  69;  C.  pp.  177,  210-13. 


VARYING    ECONOMISTS  163 

of  money  with  a  general  rise  or  fall  of  prices,  without 
regard  to  their  causes.*  In  that  year,  having  knowl- 
edge of  the  coming  adoption  and  re-adoption  of  the 
single  gold  standard,  he  anticipated  a  general  fall  of 
prices  {1st.  S.  p.  lOG) ;  and  in  1879,  and  in  1885,  he 
expected  the  fall  of  prices  to  continue  {1st  8.  p.  339; 
2d  S.  p.  88),  correctly  using  the  argument  from  demand 
and  supply.  Throughout  most  of  liis  papers  he  recog- 
nizes that  "it  is  not  a  mere  increase  of  supply"  of  the 
money  metal,  "which  tends  to  cause  a  fall  of  [its]  value, 
but  an  increase  of  supply,  in  excess  of  demand" 
{1st  8.  p.  82) ;  and  reversely,  that  a  rise  in  the  value 
of  gold,  or  fall  of  gold  prices,  is  not  due  merely  to  a 
smaller  supply  of  gold,  but  to  a  "relatively  smaller  and 
smaller  supply  of  it"  {1st  8.  p.  339):  and  so  he  has 
always  shown  willingness  to  account  for  the  fall  of 
prices  by  a  "scarcity,"  or  "relative  scarcity,"  of  gold.t 
Also  he  generally  shows  perfect  understanding  of  the 
effect  upon  prices  of  a  balancing  between  the  increasing 
abundance  and  the  falling  cost  of  production  of  gold 
on  the  one  side  and  of  commodities  on  the  other  —  that 
if  the  former  preponderate,  prices  rise,  if  the  latter, 
prices  fall,  and  if  they  go  pari  passu,  prices  remain 
stationary,  while  wages,  rents,  and  profits  rise  with  the 
growing  prosperity  {2(1  8.  pp.  23,  38);  and  that  conse- 
quently, in  a  period  of  progress  on  the  commodity  side, 
in  order  to  keep  the  equilibrium  and  to  prevent  prices 
from  falling,  there  is  need  of  an  in(n-ease  in  the  quantity 
of  the  money  metal  {2d  8.  pp.  53,  84,  85).  And,  like 
Jevons  at  first,  he  always  thinks  that  the  production  of 


* E.ixaf/s  in  finance,  First  Series,  pp.  82,  200;   Second  Series,  p.  376; 
Case  against  bimetallism,  London,  third  ed.  1895,  p.  219. 

fist  S.  p.  338;  2d  S.  p.  23;  Case  against  bimetallism,  pp.  219,  222, 


164  HISTORICAL    SURVEY 

the  precious  metals  is  not  likely  to  keep  up  with  the 
multiplication  of  commodities,  wherefore  the  "perma- 
nent tendency"  of  prices  is  likely  to  be  downward;*  and 
his  argument  against  bimetallism  is  now  that  under  it 
there  will  be  appreciation  of  money  as  well  as  under 
monometallism,  and  if  less,  yet  not  sufficiently  less  to 
make  its  adoption  worth  while. t  In  objecting  to  bimetal- 
lism, however,  he  partly  reverses  his  former  views  about 
the  "quantity  theory,"  which  had  formed  the  basis  of 
most  of  his  reasonings,  and  applies  to  metallic  currency 
the  doctrine  which  Tooke  had  invented  for  bank-note 
currency,  viz.  that  prices  determine,  instead  of  being 
determined  by,  the  quantity  of  currency  in  circulation. t 
But  his  change  is  principally  in  his  attitude  toward 
wages  and  prices.  In  ]879,  in  a  studj^  of  The  Effects 
on  Trade  of  the  Supply  of  Coinage,  he  had  written: 
"The  conclusion  to  which  I  have  come  seems  to  sup- 
port the  general  opinion  of  the  desirableness  of  having 
a  money  in  use  Avhich  does  not  change  in  value  from 
period  to  period  beyond  the  points  within  which  changes 
of  credit  produce  the  usual  oscillations"  {2cl  S.  p.  102); 
but  at  the  same  time  he  attached  only  secondary  im- 
portance to  this  quality  in  money,  allowing  that  we  may 
have  "a  good  standard  money"  which  is  "naturally 
subject  to  appreciation  and  depreciation"  (2(1  S.  p. 
101).  But  later  he  inverted  this,  and  in  1885,  prais- 
ing the  good  effects  of  "a  period  of  low  prices"  {2d  S. 
p.  35),  which  means  a  period  of  falling  prices,  he  came 
to  prefer  appreciation  to  depreciation.  Here  he  occupied 
an  extravagant  position,  for  he  also  wanted  a  fall  of 


*2d  S.  pp.  29-30,  .■?3,  93;  Case  against  himetallism,  p.  74. 
f2d  S.  pp.  32-33,  103;  Case  ac/ainsf  himffallism,  pp.  76-7. 
tCase  against  bimetallism,  pp.  82.  90,  98. 


FARTING   ECONOMISTS  165 

wages  as  well  as  of  prices  {2d  S.  p.  36).  The  next 
j'ear  he  apparently  wanted  wages  still  to  fall,  but  to 
fall  less  than  prices  {M  S.  p.  474).  But  in  1892  he 
showed  preference  for  a  state  of  things  in  which  wages 
are  stationary  and  prices  fall.*  Here  we  have  the  wages 
sjt^andard. 

Professor  Zuckerkandl  has  recently  presented  us  with 
a  well  marked  change  of  opinion,  probably  independent 
of  the  bimetallic  controversy,  and  due  to  the  so-called 
Austrian  theory  of  value,  which  treats  "value"  as 
esteem -value.  In  an  article  published  in  the  Handwor- 
terbuch  der  Staatswissenschaften,  in  1893,  he  conceived 
of  contracts  as  being  properly  repaid  in  the  same 
purchasing  power;  wherefore  he  recommended  Lowe's 
scheme  of  regulating  the  sum  of  money  owed  by  the 
variation  of  the  general  price -level  as  measured  by  the 
"tabular"  or  "multiple  standard"  (Vol.  V.  pp.  249-50). 
A  year  later  in  a  paper  published  in  the  Revue  d'Econ- 
omie  politique,  he  went  over  the  same  ground,  almost 
literally  translating  the  preceding  article,  but  now  mod- 
ified his  views  by  wishing  to  restrict  the  use  of  Lowe's 
scheme  to  cases  where  the  cause  of  the  change  of  prices 
is  on  the  side  of  money.  When  the  cause,  or  causes,  of 
the  change  are  on  the  side  of  the  commodities,  that  is, 
when  prices  are  falling  because  the  commodities  them- 
s^ves  are  falling  in  "value,"  through  improved  pro- 
djiction,  he  wishes  no  allowance  to  be  made  for  this  fall 
of  pi-ices,  and  no  alteration  in  the  sum  of  money  paid, 
on  the  ground  that  in  this  case  money  has  retained  its 
"value"  unchanged  (pp.  249-52).  Evidently  the  term 
"value"  is   here   used   in   the   sense   of   cost-value   or 


*In   Economic  Journal,    Sept.   1892,   p.   469.     The  passage  will   be 
quoted  later. 


166  HISTORICAL   SURVEY 

esteem -value.  The  case  imagined  is  one  in  which  no 
improvement  is  made  in  the  production  of  the  money- 
material  corresponding  to  the  general  improvement  in 
the  production  of  commodities.  His  later  desideratum, 
therefore,  is  that  money  should  be  stable  in  cost- value 
or  esteem-value. 


CHAPTER   Vn 


CONTINUATORS  OF  THE  EARLY  DOCTRINE  OP 
EXCHANGE - VALUE 

§1.  We  are  now  in  a  position  to  realize  how  much 
Adam  Smith  and  Ricardo  did  to  obscure  the  idea  of 
exchange -value.  For  a  full  half  century  not  a  single 
prominent  economist  maintained  the  doctrine  that  money 
ought  to  be  stable  in  exchange -value  properly  conceived, 
the  very  term  in  which  this  conception  can  be  expressed 
having  been  stolen  away  from  it  and  put  to  other  uses. 
Yet,  as  we  have  seen,  many  of  the  earlj'  economists  of 
the  nineteenth  century  were  irresistibly  attracted  by  the 
meaning  of  the  term  they  used,  to  treat  the  term  at 
times  with  its  right  meaning.  But  there  was  also  an 
undercurrent  of  economic  writers  who  kept  alive  the 
earlier  tradition,  and  not  only  took  "value"  always  in 
the  sense  of  exchange-value,  but  also  used  this  idea  in 
its  proper  meaning,  as  purchasing  power  over  commod- 
ities, though  sometimes  with  an  infusion  of  wages  among 
prices.  The  body  of  thought  represented  by  these 
writers  gradually  grew  in  force  again,  until  it  finally 
made  its  way  up  to  the  clear  region  of  recognized  eco- 
nomics.    Some  of  those  economists  who  have  professed 


EXCHANGE- VALUE    ADVOCATES  167 

it,  only  to  lapse  away,  drawn  back  by  the  ambiguities  to 
which  they  were  too  much  inured,  we  have  just 
examined.  We  now  have  to  trace  the  continuation  of 
the  early  position,  from  the  beginning  of  the  nineteenth 
century,  through  its  rigorous  supporters.  We  shall  find 
it  developing  so  as  to  accumulate  perhaps  a  greater 
number  of  adherents  than  any  other  doctrine  about 
value. 

It  was  in  the  use  of  the  multiple  standard,  or  price 
lists,  that  the  old  tradition  survived.  In  England  dur- 
ing the  Bank  Restriction  period,  1797-1821,  there  was 
much  discussion  about  the  "value"  of  the  currency,  and 
there  is  reason  to  believe  there  was  much  appeal  to  the 
course  of  prices  in  order  to  show  both  that  the  paper 
currency  had  depreciated  and  that  it  had  not  depreci- 
ated. A  reference  to  the  opinion  that  the  value  of 
money  is  to  be  judged  by  "its  relation  to  the  mass  of 
commodities  "  is  found  in  a  paper  written  by  Ricardo  in 
1816.*  Indeed,  a  small  reading  in  the  literature  of  the 
period  brings  to  light  several  supporters  of  that  opinion. 
Early  in  the  period  J.  Wheatley,  in  Remarks  on  Cur- 
rency and  Commerce,  London,  1803,  praised  Evelyn's 
measurement  of  the  value  of  money  by  means  of  prices. 
Even  on  this  side  of  the  Atlantic,  in  the  American 
Review  of  History  and  Politics,  October  1811,  Robert 
Walsh,  in  a  Letter  on  the  present  State  of  the  Currency 
of  Great  Britain,  applied  the  test  of  prices,  but  with  the 
mistake  of  wishing  the  list  to  be  confined  to  those  com- 
modities "the  value  of  which,  on  general  grounds,  is 
most  likely  not  to  be  subject  to  much  variation  "  (p. 
245,  similarly  pp.  243,  249,  cf.  p.  275),  thus  showing 
trace  of  the  idea  of  some  other  kind  of  value.     In  Eng- 

*  Works,  p.  400. 


168  HISTORICAL    SURVEY 

land  again,  in  the  House  of  Commons  in  1811,  Lord 
Castlereagh  contended  that  the  paper  money  had  not 
depreciated  according  to  "a  sense  of  value  in  reference 
to  the  currency  as  compared  with  commodities."  His 
opponents  seized  upon  the  first  part  of  this  statement  to 
poke  fun  at  it,  but  overlooked  that  the  principal  point  in 
the  statement  was  in  the  comparison  with  commodities.* 
The  next  year  Arthur  Young  published  An  Enquiry 
into  the  Progressive  Value  of  Money  in  England  as 
marked  by  the  Price  of  Agricultural  Products  (London, 
1812),  in  which  he  made  progress  in  the  construction  of 
index -numbers  by  weighting  the  prices  of  the  various 
articles  according  to  their  importance,  but  retaining 
Evelyn's  inclusion  of  wages.  But  Arthur  Young 
virtually  denied  the  commodity  standard,  at  least  as 
limited  to  agricultural  products;  for  he  would  not  admit 
that  the  rise  of  prices,  or  at  least  of  these  prices,  was 
due  to  depreciation  of  the  currency,  and  attributed  it  to 
increase  of  population,  taxes,  and  commerce,  instead  of 
seeking  any  "more  remote  cause"  (pp.  119-20). t    The 

*Cf.  Tooke,  History  of  prices,  Vol.  III.  pp.  225-6. 

tYoung's  reasons  for  not  admitting  depreciation  are  interesting  in 
contrast  with  reasons  recently  advanced  for  not  admitting  appreciation. 
Thus  he  argued  that  if  due  to  depreciation  of  money  the  rise  of  prices 
would  be  uniform,  which  was  not  the  case,  pp.  112-14;  that  the  rises  did 
not  correspond  with  the  increased  issues  to  which  they  were  attributed, 
pp.  114-lG;  and  that  in  general  the  phenomena  were  "not  the  oflfspring 
of  a  general  cause,  but  dependent  on  appropriate  and  distinct  ones," 
p.  123.  He  followed  this  up  with  An  inquiry  into  the  rise  of  prices  in 
Europe,  during  the  last  twenty-five  years,  compared  with  that  which  has 
taken  place  in  England,  in  The  Pamphleteer,  London,  1815,  in  which  he 
sought  to  prove  a  general  rise  of  prices  elsewhere,  so  that  the  rise  in 
England  could  not  be  imputed  to  its  peculiar  currency.  His  contention 
was  really,  then,  not  so  much  that  there  was  no  depreciation,  as  that  the 
depreciation  was  not  the  fault  of  the  paper  currency.  He  approved  of 
the  rise  of  prices,  and  especially  deprecated  contraction  and  falling 
prices,  p.  117  of  the  first  work,  and  pp.  194  and  199  of  the  second. 


EXCHANGE- VALUE   ADVOCATES  169 

commodity  standard  was  more  properly  used,  but  with 
adjunction  of  land  (as  already  noticed),  by  J.  P.  Smith 
in  a  work  on  The  Elements  of  the  Science  of  Money, 
London,  1813.  A  few  years  later  Lieutenant -General 
Craufurd,  in  his  Eeflections  %ipon  Circulating  Medium, 
London,  1817,  speaking  of  the  "erroneous"  opinion  that 
"the  value  of  gold  must  be  generally  equal  all  over  the 
world,"  asked,  "what  does  the  word  value  mean  as  so 
applied,  bnt  the  quantity  of  other  commodities  that  gold 
can  command?"  (p.  42  n,  cf.  also  p.  13n).  Probably  a 
perusal  of  the  innumerable  tracts  and  magazine  articles 
which  were  written  during  that  period  would  unearth 
many  more  references  to  the  same  standard. 

Even  Huskisson  inclined  to  this  position.  Huskis- 
son,  who  was  a  member  of  the  Bullion  Committee  and 
became  Secretary  of  the  Treasury,  was  a  determined 
champion  of  resumption,  advocating  it  on  the  ground 
that  "gold  in  this  country  (as  silver  at  Hamburgh.) 
is  really  and  exclusively  the  fixed  measure  of  the  rising 
and  falling  value  of  all  other  things  in  reference  to 
each  other."*  Once  he  said  that  next  to  gold  "the 
best  criterion  of  the  required  standard  would  be  found 
in  taking  an  average  price  of  corn  for  a  given  period, 
jointly  with  the  average  value  of  labor."  t  But  later 
he  rejected  the  corn  standard  as  no  better  than  a  potato 
standard,    and   showed   preference    for   measuring    the 

*  The  question  concerning  the  depreciation  of  the  currency  stated  and 
examined,  London,  1810,  p.  23  (These  words  are  paraphrased  from  Loeke, 
op.  cit.  p.  41).  "Depreciation"  meant  only  the  fall  of  the  current  money 
in  the  established  metallic  standard,  p.  25  and  passim.  If  the  metallic 
standard  itself  fell  in  value  "relatively  to  other  commodities,"  it  re- 
mained an  equally  good  measure  of  their  values  "in  reference  to  each 
other,"  p.  24;  and  though  this  fall  would  be  an  inconvenience  to  credi- 
tors, it  was  not  an  injustice  calling  for  rectification  by  government,  p.  86. 

tSpeech,  May  7th  1811,  in  Speeches,  London,  1831,  Vol.  I.  p.  201. 


170  HISTORICAL    SURVEY 

value   of   money  by  its  "relative  value  to  other  com- 
modities."* 

In  more  theoretical  style  this  position  was  advocated 
in  opposition  to  Ricardo  by  Colonel  Robert  Torrens. 
In  his  Essay  on  the  Production  of  Wealth,  London,  1821, 
Torrens  wanted  the  term  "exchangeable  value"  to  be 
confined  to  the  sense  of  general  purchasing  power  (p. 
49) ;  and  although  he  admitted  to  Ricardo  that  ex- 
change-values are  according  to  costs  of  production 
relatively  to  one  another  at  any  given  time  and  place, 
he  clearly  made  the  following  distinction:  "Even  if  a 
commodity  could  be  found  which  always  required  the 
same  expenditure  for  its  production,  it  would  not, 
therefore,  be  of  invariable  exchangeable  value,  so  as 
to  serve  as  a  standard  for  measuring  the  value  of  other 
things.  Exchangeable  value  is  determined,  not  hy  the 
absolute,  but  by  the  relative,  cost  of  production"  (p. 
56).  Although  Torrens  altered  his  views  about  the 
means  of  obtaining  steadiness  in  the  exchange -value 
of  money,  from  an  advocate  of  inconvertible  paper 
money  in  1812  becoming  a  defender  of  the  "Currency 
principles  "  involved  in  the  Bank  Act  of  1844,  he  always 
consistentlj''  used  "value"  in  the  sense  of  exchange- 
value.  In  his  first  work,  an  Essay  on  Money  and  Paper 
Currency,  London,  1812,  he  had  held  that  the  depre- 
ciation of  the  currenej'  compared  with  gold  was  only 
an  "apparent  depreciation,"  and  not  a  real  one,  be- 
cause the  value  of  the  paper  currency  in  commodities 
was^ unchanged  (pp.  174,  270,  273), t  and  the  value  of 

*  Speech,  June  11th  1822,  ibid.  Vol.  II.  pp.  14G-7  and  149.  But  he 
still  ridiculed  the  idea  of  "a  standing  committee  of  the  House,  to  regu- 
late the  fluctuations  and  variations  of  prices,"  Speech,  June  12th  1823, 
ibid.  p.  217. 

tHere  his  theory  was  better  than  in  the  contemporary  publication, 


EXCHANGE- VALUE   ADVOCATES  171 

gold  had  riseu  (p.  191).  Aud  in  that  work  (pp.  44, 
1667,  asTn "his  last  work,  The  Principles  and  Practice  of 
Sir  Rohert  PeeVs  Bill  of  1844,  London,  1848  (pp.  86, 
87),  he  treated  a  rise  of  prices  as  a  fall  in  the  value  of 
the  currency,  aud  reversely.* 

§2.  In  1822  Joseph  Lowe,  a  merchant,  published  a 
work  which,  twice  issued  in  London,  once  in  New  York, 
and  translated  into  German,  fell  into  neglect,  but  has 
since  become  famous  for  the  small  portions  of  it  devoted 
to  our  subject.  In  this  work,  The  Present  State  of  Eng- 
land in  regard  to  Agriculture,  Trade,  and  Finance,  Lowe 
suggested  and  advocated  the  formation  of  an  official 
"table  of  reference, ''^giving  a  "standard  from  mate- 
rials," by  which  the  varying  "power  of  money  in  pur- 
cjiase"  might  be  measured,  in  order  that  its  variations 
could  be  corrected  in  contracts  if  the  contractants  so 
desired,  since  "it  is  of  much  more  importance  in  all 
contracts  of  duration  to  look  to  the  value  than  the 
numerical  amount"  (pp.  261-91,  Appendix,  pp.  85-101). 
The  title  of  the  chapter  in  which  this  scheme  appears  is 
"Fluctuation  in  the  Value  of  Money  or  in  the  Price  of 
Commodities  " ;  and  throughout  there  is  identification  of 
the  idea  of  the  "value"  of  money  with  its  purchasing 
power  over  commodities,  without  interference  from  the 
idea  of  labor,  or  cost  of  production,  wages  being  ex- 
pressly excluded.  What  is  desired,  then,  is  that  money 
should  be  stable  in  exchange -value,  since  the  plan  is  to 
make  allowance  for  its  not  being  so. 

In  dependence  upon  Lowe  the  same  scheme  was  a 

above  noticed,  of  Arthur  Young;  but  his  facts  were  probably  not  so 
accurate. 

*In  this  connection  it  may  be  mentioned  that  Peel  himself  in  his 
Speech,  May  Gth  1844,  used  "value"  only  in  the  sense  of  exchange-value. 
See  especially  p.  16  of  the  reprint  in  the  same  year  (John  Murray). 


172  HISTORICAL    SURVEY 

few  years  later  advocated  by  G.  Poulett  Scrope,  whose 
opinion  on  governmental  monetary  policy  has  already 
been  quoted.  In  his  little  work  Principles  of  Political 
Economy,  addressed  to  his  constituents,  London,  1833, 
this  economist  has  presented  more  precise  views  about 
our  subject  than  almost  any  other  waiter  who  has  treated 
of  it.  "Invariability,"  he  says,  "in  respect  to  the  qual- 
ity it  is  emploj'ed  to  measure  is  absolutely  indispen- 
sable to  every  standard  measure.  Stability  of  value  is 
the  first  and  most  essential  requisite  of  the  instrument 
employed  for  the  exchange  of  values"  (p.  403).*  And 
this,  he  had  already  said,  is  "stability  of  value  as  a  pur- 
chasing power"  (p.  401);  and  he  speaks  of  changes  in 
the  "value"  of  money  disturbing  the  holders  of  money, 
or  of  claims  to  money,  because  altering  their  command 
over  goods  (p.  402).  He  also  refers  back  to  an  earlier 
chapter  in  which  he  had  noticed  that  in  political  econ- 
omy "value"  must  mean  "value  in  exchange,"  and  this 
must  mean  "purchasing  power"  (pp.  164-5),  and  had 
declared  that  value  is  "purely  relative,"  and  there  can- 
not be  "such  a  thing  as  positive,  absolute,  or  real 
value"  (p.  166),  and  that,  value  being,  not  estimation, 
but  "comparative  estimation  as  an  object  of  exchange," 
"when  used  without  reference  expressed  or  implied  to 
any  particular  commodity  as  its  measure,"  the  term 
"means  general  value,  or  value  in  exchange  against 
goods  in  general"  (p.  167n).t  "To  be  invariable  in 
value,"  he  continues,  "is  to  preserve  the  same  relation 
to  the  mass  of  other  commodities  in  general  estimation ; 


*Cf.  also  pp.  166n,  216,  422. 

tHere  he  rejects  labor  both  as  a  standard  of  value  through  the 
course  of  time,  and  as  a  regulator  of  relative  values  at  the  same  time 
and  place.     Cf.  p.  197n. 


EXCHANGE- VALUE   ADVOCATES  173 

and  iu  order  for  any  particular  commodity  to  possess 
this  quality,  it  must  increase  in  quantity — or,  at  least,  in 
the  facilities  for  its  production — with  the  aggregate  or 
average  of  other  commodities;  in  which  case  alone  any 
fraction  of  it  will  continue  to  command  the  same  fraction 
of  the  aggregate  of  goods"  (p.  405).  He  adds,  in  ex- 
planation of  the  badness  of  money  variable  in  such 
value:  "It  is  quite  indifferent  whether  the  change  has 
been  brought  about  by  circumstances  immediately  affect- 
ing the  production  of  gold  or  goods; — whether  the  real 
costs  of  producing  the  one  or  the  other  have  increased 
or  diminished.  The  change  in  the  relative  facility  of 
producing  gold  and  goods,  in  either  case,  occasions  a 
change  in  the  value  of  gold — and,  consequently,  in  this 
country,  of  money  —  equally  unjust  and  unfair  upon 
debtors  or  creditors,  both  parties  having  contracted  to 
pay  or  to  receive  monej^  upon  the  faith  of  money  con- 
tinuing to  remain  invariable  in  value, — that  is,  in  its 
relations  to  the  mass  of  other  commodities"  (p.  406). 
The  appeal  to  "the  mass  of  other  commodities,"  twice 
made,  is  precisely  the  standard  rejected  by  Ricardo,  so 
that  here  we  have  revolt  against  that  great  master  of 
English  economics.  An  enhancement  of  the  "value"  of 
money,  or  fall  of  prices,  "owing  to  the  facilities  for  pro- 
ducing gold  not  having  kept  pace  with  those  for  the 
production  of  the  bulk  of  commodities,"  he  regarded  as 
unjust,  on  the  ground  that  "the  producing  classes — the 
owners  of  labor,  land,  and  capital, —  have  a  right, 
founded  on  the  simple  principles  of  natural  justice,  to 
share  amongst  themselves  exclusively  the  increased 
produce  which  arises  from  their  own  increasing  num- 
bers, skill,  ingenuity,  exertions,  and  productive  powers," 
and  that  "the  non-producing  classes,  who  are  their  credi- 


174  HISTORICAL    SUBVEX 

tors  for  fixed  sums  of  money,  have  no  equitable  title  to 
any  increase  in  the  average  quantity  of  commodities 
which  these  fixed  suras  command,  since  they  contribute 
nothing  towards  such  increase"  (p.  -JIO),*  Scrope,  of 
course,  recognized  that  no  commoditj^  could  be  depended 
upon  to  be  stable  in  value  in  this  way  (p.  405);  nor, 
although  he  desired  it,  did  he  expect  government  to  be 
granted  the  power  of  regulating  paper -money  with  a 
view  to  keeping  it  stable  in  value  (pp.  418-19).  He 
therefore  recommended  that  government  should  at  least 
afford  to  individuals  the  means  of  correcting  the  errors 
of  the  monetary  standard,  by  carrying  out  Lowe's 
suggestion,  and  establishing  what  he  now  calls  a  "Tabu- 
lar Standard,"  in  the  measurement  of  which  he  likewise 
would  take  into  account  onlj^  the  prices  of  goods,  mak- 
ing no  mention  of  the  wages  of  labor  (pp.  406-7).  His 
statements  are  thus  as  descriptive  as  possibly  can  be  of 
the  desideratum  in  money  being  stability  in  exchange- 
value  proper. 

v§3.  Scrope  wrote  at  a  time  when  prices  were  falling 
and  the  exchange -value  of  money  rising,  and  when  that 
condition  was  partly  due  to  legislative  action  of  the 
nation  under  the  guidance  of  men  who,  like  Kicardo, 
did  not  advocate  stability  of  money  in  exchange -value, 
or  who,  like  Huskisson,  did  not  attach  much  import- 
ance thereto,  and  who  afterwards,  like  McCulloch  and 
Babbage,  defended  the  course  pursued  in  1819  on  the 
ground  that  the  monetary  standard  had  proved  itself 
stable  in  cost- value  or  esteem -value.  It  was  precisely 
against  this  state  of  things,  and  this  theory,  tliat  Scrope 
protested.  There  were  other  protestors.  Such  were  the 
so-called   Birmingham   School  of  currency  writers,   in 

*The  reasoning  continues  to  p.  414. 


EXCHANGE- VALUE   ADVOCATES  175 

sympathy  with  whom  was  the  historian  Archibald  Ali- 
son, who  wrote  England  in  1815  and  1845;  or,  A  Suffi- 
cient and  a  Contracted  Currency,  London,  1845.  All 
these,  if  they  did  not  insist  upon  the  need  of  money 
being  stable  in  exchange -value,  wanted  it  at  least  to 
depreciate  rather  than  to  appreciate,  Alison  deprecating 
the  latter  especially,  on  the  ground  that  it  helps  the 
increase  of  a  few  large  fortunes  and  depresses  the  small 
fortunes  of  the  middle  classes,  and  so  fosters  inequality 
of  conditions  with  its  attendant  moral  and  social  evils. 
They  desired  to  accomplish  their  aim  by  permitting 
greater  freedom  in  the  issuance  of  bank-notes,  with  the 
requirement  of  redemption  only  at  the  market  price  of 
bullion,  that  is,  in  variable  amounts,  according  as  the 
exchange -value  of  gold  or  silver  rises  or  falls,  their 
theory  as  to  why  the  bank-notes  should  be  stable  in 
exchange -value  being  that  of  the  so-called  Banking 
School. 

Apart  from  these  in  the  method  of  accomplishing  the 
same  end,  stood  the  historian  Henry  James,  who  was 
the  anonymous  author  of  a  work  entitled  State  of  the 
Nation.  Causes  and  Effects  of  the  Rise  and  Fall  in  value 
of  Property  and  Commodities  from  the  year  1790  to  the 
present  time,  London,  1835.  James  started  out  with  the 
statement  that  "the  question  of  prices  is  at  the  bottom 
of  the  whole"  (p.  3,  of.  p.  116);  and  he  conceived  of 
money  as  a  stable  standard  of  value  if  the  rise  of  some 
prices  were  counterbalanced  by  a  fall  of  others,  so  that 
"although  particular  prices  might  rise  or  fall,  prices  at 
large  would  remain  the  same  "  (p.  4).  He  found  fault 
with  the  artificial  measures  which  had  first  raised  prices 
at  large  by  the  Bank  Restriction,  and  had  then  caused 
their  fall  by  the  restoration  of  the  old  metallic  standard 


176  HISTORICAL    SURVEY 

and  its  confinement  to  gold.  He  objected  to  estimating 
the  "depreciation"  of  the  currency  solely  by  its  relation 
to  gold  or  silver,  and  wanted  it  to  be  estimated  by  the 
average  price  of  produce  and  manufactures  (p.  101). 
He  especially  condemned  the  appreciation  of  money,  and 
would  have  preferred  that  upon  the  re-adoption  of  me- 
tallic money  the  metallic  contents  of  the  pound  sterling 
had  been  reduced,  in  order  to  "support  the  then  exist- 
ing scale  of  prices"  (p.  104,  cf.  p.  114);  and  even  after 
the  lapse  of  fifteen  years  he  wanted  to  return  to  the  old 
level  of  prices  by  such  a  reduction  of  the  metallic  stand- 
ard (pp.  109,  113,  121,  135-7).  In  general,  instead  of 
seeking  to  obtain  stability  of  money  in  general  exchange- 
value  through  regulation  of  the  paper  issues,  he  would 
prefer  to  aim  at  this  object  by  altering  the  ratings  of 
the  coins  (p.  173).  We  are,  however,  not  here 
interested  in  the  means  recommended  for  the  end 
desired,  but  with  the  conception  of  the  end  itself. 
James  conceived  only  of  the  commodity  standard,  and 
wanted  stability  of  money  in  exchange -value. 

During  this  period  other  more  theoretical  econo- 
mists, outside  of  England,  also  entertained  the  idea  of 
exchange -value,  though  somewhat  weakly.  Thus  in 
America  Daniel  Raymond,  in  his  Elements  of  Political 
Economy,  Baltimore,  1820,*  consistently  used  "value" 
in  the  sense  of  exchange -value  proper,  often  going  so 
far  as  to  identify  it  with  "price"  (I.  pp.  57,  60,  65,  78, 
H.  p.  353);  and  rejecting  the  labor  standard  (I.  pp. 
62-4),  he  applied  the  demand-and-supply  theory  to  all 
values  or  prices  (I.  p.  183).  He  complained  of  fluctu- 
ations in  the  prices  of  commodities  as  violating  all 
existing  contracts  (T.  p.  241,  cf.  p.  250),  for  prevent- 

•  References  are  to  the  third  edition,  in  two  volumes,  Baltimore,  1836. 


EXCHANGE- VALUE   ADVOCATES  111 

ing  which  he  wanted  to  do  away  with  bank-note  cur- 
rency. Evidently  he  took  the  term  "exchangeable 
value"  in  its  literal  sense,  and  wanted  money  to  be 
stable  in  such  value.  Similarly,  in  France,  Blanqui, 
in  his  Precis  6Umentaire  d' Economie  politique,  1826,* 
treated  "value"  as  exchange -value,  measured  by  the 
quantity  of  other  things  procurable  in  exchange  for  the 
thing  in  question  (pp.  19,  88),  and  wanted  money  to  be 
such  that  we  may  feel  sure  about  the  same  quantity  of 
commodity  always  corresponding  to  the  same  sum  (p. 
80).  Less  definite  was  Rossi,  who,  in  the  first  volume 
of  his  Conrs  iV Economic  politique,  Paris,  1840,  rejected 
both  the  labor  standard  (pp.  152-7,  159)  and  the  wheat 
standard  (pp.  183-9).  He  devoted  much  attention  also 
to  showing  that  money  is  not  an  accurate  measure  of 
value  in  different  times  and  places  (pp.  157-82) ;  and 
denied  that  we  can  have  any  perfect  measure  of  value 
(pp.  149,  190).  Now,  Rossi  divided  value  into  value  in 
use  and  value  in  exchange  (p.  50) ;  but,  unlike  Adam 
Smith  and  his  followers,  he  wanted  attention  to  be  paid 
in  economies  to  value  in  use  (pp.  58  ff.),  and  treated 
value  in  exchange  only  as  a  "form  of  value  in  use" 
(p.  51).  He  denied  the  universal,  and  hence  the  scien- 
tific, validity  of  the  cost -of -production  theory  for  rela- 
tive values  (pp.  90-107),  and  accepted  the  demand-and- 
supply  theory  (pp.  77-89).  In  his  disquisition  upon 
the  measure  of  value,  he  did  not  directly  say  that  he 
was  searching  for  a  measure  of  value  in  exchange;  but 
some  allusions  show  that  this  was  the  case  (pp.  163, 
186).  Also  his  rejection  of  money  and  of  wheat  as 
gooid  measures  of  value  shows  itself  to  have  been  be- 
cause  their    relations   to   other   commodities,  or   their 

*  References  are  to  the  third  edition,  Paris,  1857. 


178  HISTORICAL    SURVEY 

purchasing  powers,  in  the  case  of  money  illustrated  by 
prices,  are  not  constant  (pp.  150,  177-81).*  His  con- 
ception of  a  thing  constant  in  "value"  was  of  one  as  to 
which  the  relation  between  its  supply  and  the  needs  of 
the  market  is  constant  (p.  149) ;  which  fits  exchange- 
value.  His  definition  of  "valvie  in  exchange"  was  also 
exactly  that  of  exchange -value  proper  (p.  50);  and  he 
showed  alarm  at  the  prospect  of  falling  prices,  which  he 
anticipated  because  of  the  lessened  supplies  of  the  pre- 
cious metals  from  Spanish  America  (pp.  180-1).  He 
would  seem,  then,  to  be  desirous  of  a  monetary  measure 
that  should  be  as  nearly  stable  as  possible  in  exchange- 
value. 

§4.  The  middle  of  the  century  ushered  in  a  new 
period,  the  course  of  prices  being  reversed  and  taking 
an  upward  turn,  under  the  influence  of  gold  from  Cali- 
fornia and  Australia,  which  gave  rise  to  fears  of  greater 
depreciation  than  really  occurred.!  Under  these  fears 
Scrope's  recommendation  of  Lowe's  scheme  was  ad- 
vanced as  a  means  of  saving  the  interests  of  creditors, 
by  R.  H.  Walsh  in  his  Elemenfary  Treatise  on  Metallic 
Currency,  Dublin,  1853  (pp.  94-6),  and  by  J.  Maclaren 

♦  On  p.  185  he  is  not  so  clear. 

tThe  rise  of  prices  was  not  so  great  as  carelessly  expected,  (1) 
because  the  new  supplies  were  additions  not  merely  to  the  existing 
supply  of  gold,  with  which  people  were  inclined  only  to  compare  them, 
but,  so  long  as  the  French  bimetallism  was  effectual,  to  the  existing 
supply  both  of  gold  and  silver.  This  was  especially  insisted  upon  by 
Chevalier,  who  th-erofore  expected  great  depreciation  after  the  French 
reserves  of  silver  should  give  out.  And  (2)  because  the  new  supplies  of 
money  and  the  incipient  rise  of  prices  encouraged  greater  production  of 
other  goods,  thus  producing  increased  demand  for  gold.  This  was 
especially  insisted  upon  by  Tooke  and  Newmarch  in  the  last  volume  of 
the  Eixtorii  of  prices.  Both  these  are  reasons  rather  for  the  retarding 
of  the  fall  of  gold  in  exchange-value,  and  possibly  in  esieem-value,  but 
by  no  means  in  cost-value. 


EXCHANGE- VALVE    ADVOCATES  179 

in  his  Sketch  of  the  History  of  Currency,  Loudon,  1858 
(pp.  311-12,  366).  Both  these  writers,  however,  more 
seriously  urged  the  adoption  of  the  silver  standard, 
the  latter  thinking  the  adoption  of  Scrope's  scheme  to 
be  impracticable,  aud  the  former  holding  it  in  reserve  in 
ease  the  silver  standard  should  fail.  At  the  same  time 
a  business  man,  E.  Hill,  in  a  work  entitled  Principles 
of  Currency.  Means  of  ensuring  Uniformity  of  Value  and 
Adequacy  of  Supply,  London,  1856,  especiallj^  emphasized 
the  need  of  obtaining  stability  of  "vabie"  in  money  (pp. 
29,  32,  65-6),  which  he  hoped  to  obtain  by  regulating 
the  supply  of  money  automatically,  by  issuing  interest- 
bearing  paper  money  like  bills  of  exchange,  aud  showed 
that  by  "value"  he  meant  "value  in  exchange"  (pp. 
66-7),  conceiving,  like  Rossi,  of  an  article  constant  in 
exchange-value  as  one  in  which  there  is  a  fixed  relation 
between  the  demand  and  the  supply  (p.  67). 

More  attention  was  early  devoted  to  the  subject  of 
the  new  gold  by  an  economist  of  some  repute  in  his  day. 
In  The  Australian  and  Californian  Gold  Discoveries ,  and 
their  Probable  Consequences,  Edinburgh,  1853,  P.  J. 
Stirling  treated  of  "value"  wholly  from  the  point  of 
view  of  exchange-value,  identified  with  purchasing 
power  (p.  45n).  He  did  this  notwithstanding  that  he 
was  an  ardent  advocate  of  the  Ricardian  cost -of- pro- 
duction theory  of  relative  values,  so  much  so  that  he 
rejected  Mill's  emendation  in  the  case  of  money  about 
the  need  of  a  change  in  the  quantity  produced  before 
the  change  in  cost  can  operate  (p.  85),  and  even  fell 
into  the  absurdity  of  allowing  no  influence  upon  prices 
in  Europe  to  the  great  supplies  of  gold  and  silver  at 
first  brought  from  America  upon  its  discovery  by  the 
Spaniards,  until  after  seventy  or  eighty  years  the  cost 


180  HISTORICAL    SURVEY 

of  producing  silver  sank  (pp.  v-vi,  157-8),  when,  he 
argued,  the  very  next  year  after  the  introduction  of  an 
improvement  in  Mexico  prices  in  Europe  rose  as  a  eon- 
sequence.*  Yet  he  employed  this  Rieardiau  theory  as 
having  to  do  only  with  relative  values,  and  himself  dealt 
only  with  relative  values.  He  conceived  of  a  change  in 
the  "value"  of  money  as  merely  an  inverse  change  in 
the  prices  of  commodities  (p.  61);  and  he  admitted  for 
a  permanent  and  universal  change  in  the  "value  "  of  the 
precious  metals  just  four  supposable  causes.  These  are: 
"1st,  A  change  of  the  conditions  under  which  the  metals 
themselves  are  produced,  without  a  corresponding  change 
of  the  conditions  under  which  commodities  are  pro- 
duced. If  the  cost  of  producing  the  metals  is  dimin- 
ished, general  prices  will  rise,  and  vice  versa.  .  .  . 
2d,  An  alteration  of  the  conditions  under  which 
commodities  generally  are  produced,  without  a  corre- 
sponding change  in  the  conditions  under  which  gold  and 
silver  are  produced.  If  the  cost  of  producing  all  com- 
modities be  diminished  —  the  cost  of  producing  the 
metals  being  as  before —  .  .  .  the  price  of  com- 
modities will  fall,  and  the  value  of  money  will  rise  [and 
vice  versa^ .  3d,  An  increase  or  diminution  of  the  total 
amount  of  the  precious  metals  in  circulation,  without  a 
corresponding  enlargement  or  abridgment  of  the  total 
supply  of  commodities  to  be  exchanged  and  circulated 
by  their  means;  or  4th,  An  increase  or  diminution  of 
the  supply  of  commodities,  without  a  corresponding 
enlargement  or  abridgment  of  the  amount  of  the  precious 
metals  in  circulation;" — which  four  he  sums  up  bj' 
reducing   to   two:   "namely,    1st,  An  alteration  of   the 


•Pp.  94-6,  126,  132-6,  138,  15G-7.     The    trouble    was    also  with    his 
facts,  for  which  he  relied  upon  Adam  Smith. 


EXCHANGE- VALUE   ADVOCATES  181 

relative  cost  of  producing  commodities  and  the  precious 
metals;  or,  2d,  A  change  in  their  relative  quantities" 
(pp.  69-70).*  It  was  in  such  "value,"  "in  relation  to 
commodities,"  that  he  wanted  money  to  be  stable  (pp. 
24,  25-6). 

The  expectation  of  a  fall  in  the  value  of  money,  or 
the  belief  in  its  occurrence,  drew  attention  also  to  the 
methods  of  measuring  its  extent.  Then  it  was  that 
J.  Prince -Smith  introduced  the  method  of  treating  of 
variations  in  the  value  of  money  algebraically,  in  an 
article  on  Valeur  et  Monnaie  in  the  Journal  des  Econ- 
omistes,  15th  Dec.  1853. t  He,  like  others  already 
noticed,  conceived  of  a  commodity  the  most  stable  in 
"general  value"  as  one  in  which  "the  proportion  be- 
tween the  supply  and  the  demand  is  the  most  stable" 
(p.  374) ;  and  for  money  he  wanted  the  commodity  that 
varies  least  in  such  value,  by  which  he  shows  that  he 
meant  general  exchange -value  not  only  by  his  whole 
treatment  of  the  subject,  but  by  saying  that  such  con- 
stancy of  money  is  obtained  so  long  as  "the  general 
level  of  prices"  is  stable  {ibid.).t     A^little  later  Levas- 

*Cf.  also  pp.  208,  246-7n.  The  first  of  these  two  sets  of  conditions 
have  been  seen  given  by  Torrens,  and  both  by  Scrope.  The  last  set, 
about  relative  quantities,  is  not  consistent  with  his  own  doctrine  of 
"permanent  value,"  applying  only,  in  his  view,  to  market  value;  but  we 
are  not  concerned  with  any  inconsistency  on  that  subject.  The  four 
individual  conditions  are  the  four  causes  we  have  already  noticed  as 
having  been  later  used,  but  not  adhered  to,  by  Laughlin. 

t  Reprinted  in  the  third  volume  of  his  Gesammelte  Schriften,  Berlin, 
1880,  with  some  annoying  misprints  in  the  formulse. 

tCf.  also  the  little  tracts,  Der  Markt,  18G3,  and  Geld  und  Banken, 
1865,  in  the  first  volume  of  his  Schriften,  pp.  18  and  68,  73  (and  again, 
p.  245).  He  later  became  an  advocate  of  bimetallism,  as  better  provid- 
ing such  money,  WdJirung  und  Miime,  1870,  p.  258  (cf.  p.  252).  He 
now  defined  value  (Werth)  as  indicating  a  relation  not  to  one  but  to  all 
things,  and  as  purchasing  power,  measured  by  "what  I  can  get  for  it,"  Die 


182  HISTORICAL    SUB  VET 

seur,  Newmarch,  and  Jevons  made  efforts  to  determine 
the  depreciation  by  means  of  prices,  and  so  treated  the 
"value"  of  money  as  exchange -value;  and  during  this 
period  also,  as  we  have  seen,  Macleod  treated  "value" 
in  general  as  exchange-value. 

At  the  same  time  some  other  economists,  not  spe- 
cially concerning  themselves  with  the  gold  question, 
began  to  treat  "value"  solely  as  exchange -value.  So 
did  Courcelle  Seneuil  in  his  Traite  tJieoriqiie  et  pratique 
d' Economie  politique,  Paris,  1858  (Vol.  I.  pp.  243,  256, 
259),  who  preferred  bimetallism  as  giving  money  less 
variable  in  such  value  (pp.  344-5).  Many  years  later 
he  still  used  the  term  in  this  sense  only,  in  RicJiesse  et 
Valeur,  Journal  des  Economistes,  April  1883  (pp.  8,  14), 
notwithstanding  that  he  held  the  Ricardian  cost-of-pro- 
duction  theory  of  relative  values  (pp.  9,  15-17).  And 
in  The  Science  of  Wealth,  Boston,  1866  (5th  ed.  1869), 
Amasa  Walker  confined  the  term  "value"  to  "power  in 
exchange"  (pp.  8,  9,  cf.  p.  175),  and  wanted  money  to 
be  stable  in  such  value  or  purchasing  power  (pp.  123, 
127).  He  also  sought  to  measure  changes  in  the  value 
of  money  inversely  by  prices  (pp.  176-9,  481,  488),  and 
would  exclude  consideration  of  special  causes  of  varia- 
tion in  particular  classes  of  commodities  (pp.  183-4).* 
He  was  interested  principally  in  the  fluctuations  in  the 
value  of  paper  money,  and,  like  Raymond  before  him, 
opposed  the  freedom  of  bank-note  issuance. 

§5.    About  the  time  of  the  swing  of  the  pendulum 

nerteste  englische  Milmfrage,  1870,  p.  271;  and  similarly  Ztir  MUnzfrage 
im  Volksicirthscha  ft  lichen  Kongress,  1871,  p.  292,  and  Aus  der  Milmre- 
formdebatte  im  Reichstag,  1871,  p.  314. 

*  Yet  on  p.  176  he  would  use  the  prices  of  articles  least  liable  to  vari- 
ations on  their  own  account;  and  on  p.  483  he  casually  used  the  cost 
standard  for  the  value  of  gold. 


EXCHANGE- VALUE    ADVOCATES  183 

backward  into  a  fall  of  general  prices,  Jevons  in  Eng- 
gland,  Meuger  in  Austria,  and  Walras  in  Switzerland 
were  engaged  in  propounding  a  theory  of  value  as 
esteem -value  which  is  the  foundation  of  the  modern 
science  of  economics.  We  have  seen  that  Professor 
Menger  wants  money  to  be  stable  in  this  kind  of  value, 
the  theory  of  which  he  has  spent  so  much  trouble  to 
develop;  and  that  Jevons,  after  first  wanting  money  to 
be  stable  in  exchange -value,  later  came  to  treat  the 
subject  as  if  money  ought  to  be  stable  in  cost -value, 
although  this  had  no  connection  with  his  new  theory  of 
value.  We  now  have  to  deal  with  the  views  of  that  one 
of  the  triad  who  has  devoted  most  attention  to  the 
subject  of  money.* 

Professor  Walras  has  a  definite  conception  of  what  he 
wants  money  to  be  the  measure  of,  and  clearly  expounds 
itT^but  he  exhibits  the  evil  of  an  imperfect  nomencla- 
ture^ In  his  earliest  work  Elements  d'Economie  politique 
pure,  Lausanne,  1874,  he  did  sometimes  make  use  of 
the  term  valeur  ichangeable,  and  spoke  of  this  value 
as  a  property  which  certain  things  have  of  being  bought 
and  sold  (p.  48).  And  herightly  conceived  of  it  as 
exchange -value  proper;  for  he  said  it  is  impossible  for 
one  thing  to  be  constant  in  exchange -value  unless  all 
things  are,  because  a  change  in  the  exchange -value  of 
anything  else  affects  the  exchange -value  of  this   thing 

*These  three  were  preceded  many  years  by  H.  H.  Gossen,  whose 
work,  Entwickehmg  der  Gesetze  des  menscldichen  Verlielirs,  nnd  der 
daraiis  fliessenden  Regeln  fiir  menschliches  Handeln,  Cologne,  1853, 
attracted  little  attention  at  the  time,  but  has  recently  been  republished, 
Berlin,  1889.  It  is  possible  that  Gossen  wanted  money  to  be  stable  in 
exchange-value:  see  p.  203,  and  cf.  pp.  201,  255-6  (of  the  2d  ed.).  But 
his  exposition  is  not  clear.  On  p.  204  he  seems  to  hold  Locke's  view 
that  money  ought  to  be  stationary  in  its  quantity.  On  p.  149  he  asserts 
that  money  is  a  standard,  not  of  value,  but  of  labor-cost. 


184  HISTORICAL    SURVEY 

(pp.  167-8,  2d  ed.  1889,  p.  456),— not  recognizing, 
however,  that  there  may  be  compensation  by  opposite 
changes  in  two  or  more  other  things.  But  even  in  that 
work,  and  generally  afterwards,  he  makes  little  use  of 
this  term.  Yet  he  sometimes,  apparently,  uses  the 
simple  term  "value"  in  the  sense  of  exchange-value,  as 
when  he  tells  us  all  values  are  essentially  relative 
(p.  147,  2d  ed.  p.  172).  He  even  says  that,  speaking 
in  a  general  manner,  there  are  no  values,  but  only  rela- 
tions of  values  (p.  189);*  which  can  hardly  bear  other 
interpretation  than  that  exchange-values  are  relations  of 
esteem-values.  In  general  he  now  uses  the  term  "valuej' 
in  the  sense  of  esteem -value,  and  one  of  the  great  ser- 
vices he  has  rendered  to  economics  is  the  analysis  of  this 
kind  of  value.  He  teaches,  following  Burlamaqui  and 
his  own  father,  Auguste  Walras,  that  the  causes  of 
"value"  are  utility  and  limitation,  which  together  he 
calls  "rarity"  (pp.  101-4,  157,  cf.  p.  162).  Rarity,  so 
defined,  he  also  identifies  with  the  intensity  of  the  last 
want  satisfied  by  the  quantity  of  the  thing  possessed; 
whereby  he  is  enabled  to  enunciate  the  supply-and- 
demand  theory  of  relative  values  in  the  form,  which  he 
regards  as  a  capital  principle  in  economics,  that  "the 
values  of  commodities  are  proportional  to  the  intensities 
of  the  last  wants  satisfied,  or  to  the  rarities."  t  There- 
fore, values  and  rarities  being  proportional  to  each 
other,  he  identifies  them,  saying  that  "the  elements  of 
variation  of  rarities  are  the  elements  of  variation  of 
values"  (ibid.) ;  and  he  often  conjoins  them  in  one  com- 


*So  again  in  Monnaie  d'or  avec  billon  d'argent  rigulateur,  1884,  re- 
printed in  Etudes  dWconomie  politiqtte  appliquie,  Lausanne  and  Paris, 
1898,  p.  4. 

fD'une  mSthode  de  r^gularisatlon  de  la  variation  de  la  valeur  de  la 
monnaie,  Lausanne.  1885,  p.  1.  (In  Etudes,  p.  26). 


EXCHANGE -VALUE   ADVOCATES  185 

pound  phrase.  In  thus  identifj'ing  not  merely  relative 
values  with  relative  rarities,  but  values,  simply  spoken, 
with  rarities,  it  is  plain  that  he  does  not  refer  merely 
to  exchange-values,  but  to  esteem -values.  Therefore 
when  in  his  earliest  work  he  tells  us  that  one  of  the  first 
qualities  in  money  is  fixity  of  "value"  (p.  172;  repeated 
in  2d  ed.  p.  425),*  we  might  be  at  a  loss  as  to  whether 
he  wants  fixity  of  esteem -value  or  fixity  of  exchange- 
value.  But  he  soon  sets  all  doubt  at  rest,  and  clearly 
states  his  position,  though  in  a  manner  unnecessarily 
cumbersome.  In  a  paper  published  in  the  Reveu  de 
Droit  international,  Dec.  1st  1884.  entitled  Monnaie  d'or 
avec  billon  d' argent  regulateiir,  and  recently  republished 
in  a  collection  of  his  "Studies,"  he  consistently  confines 
his  use  of  the  term  "value"  to  the  sense  of  esteem- 
value;  telling  us,  for  instance,  that  if  two  things  change 
relatively  to  each  other  the  value  of  the  one  may  fall  or 
that  of  the  other  may  rise,  according  to  variations  in 
their  final  utility! — a  statement  which  we  know  to  be 
true  only  of  esteem -value.  And  in  the  sequel  to  that 
paper,  the  Memoire  read  before  the  Societe  vaudoise  des 
Sciences  naturelles.  May  6th  1885,  reprinted  as  a  separate 
brochure, t  part  of  which  was  incorporated  in  the  second 
edition  of  the  Elements,  rewritten  in  1889,11  and  repub- 
lished in  the  recent  Etudes,  he  says  that  variations  in 
the  average  of  general  prices  do  not  indicate  the  varia- 
tions in  the  "value  and  rarity"  of  money  (pp.  10,  16)  ;** 
which  is  true  of  the  esteem -value  of  monev.     But  now 


*See  also  the  article  De  la  fixity  de  valeur  de  V  ^taJon  monitaire. 
Journal  des  Economistes,  Oct.  1882,  incorporated  in  the  2d.  ed.  of  the 
Elements,  35e  Le^on. 

tin  E'tudes,  pp.  5-6. 

tZ)'  une  mithode  de  rigularisation,  etc.,  already  referred  to. 

II  In  the  39e  Le(;on,  pp.  457-65.  **0f  the  separate  reprint. 


186  HISTORICAL   SURVEY 

he  tells  us  plainly — and  repeats  it  iu  the  MSmoire,  and 
in  the  several  republications  —  that  what  is  desirable  in 
money  is  not  fixity  of  its  "value  and  rarity,"  that  is,  not 
fixity  of  its  esteem -value,  but  variability  of  its  "value 
and  rarity"  (esteem -value)  in  conformity  with  the 
mean  variation  in  "value  and  rarity"  (esteem-value)  of 
commodities  in  general,  or  social  wealth,  so  that  there 
shall  be  fixity  of  the  relation  between  its  "value  and 
rarity,"  or  esteem -value,  and  the  "values  and  rarities," 
or  esteem-values,  of  all  commodities.*  Or,  to  be  more 
definite,  he  says  he  wants  the  "power  of  acquisition," 
that  is,  the  purchasing  power,  of  money  to  be  stable  ;t 
or  he  wants  the  variation  of  the  "value  and  rarity"  of 
money  to  be  such  that  the  prices  of  things  should  not  on 
the  average  rise  or  fall,  + — and,  again,  he  prefers  silver 
to  gold  as  standard  money  because  under  it  prices  would 
probably  be  more  stable;  ||  and  under  the  present  gold 
standard  with  limited  coinage  of  silver  he  advises  that 
the  coinage  of  silver  should  be  so  regulated  as,  by  in- 
creasing or  decreasing  the  quantity  of  metallic  monej^ 
(all  uncovered  paper  money  being  banished),  shall  pre- 
vent the  fall  of  prices  which  has  been  going  on,**  and 
shall  in  the  future  keep  the  general  level  of  prices  steady 
— a  scheme  which  differs  from  that  of  many  advocates 
of  regulated  inconvertible  paper  money  only  in  the  kind 
of  money  wherewith  the  object,  the  same  in  all  eases,  is 
to  be  attained,  and  agrees  in  the  object  also  with  the 
scheme  of  Lowe,  Scrope,  and  Jevons.     Thus  Professor 

*  Monnaie  d' or,  in  Etudes,  pp.  9,  10;  D' une  mitJiode,  pp.  12,  16,  17, 
18;  EUments,  2d  ed.  pp.  411,  432,  442. —  Remember  that  the  relation  be- 
tween esteem-values  is  exchange-value;  wherefore  a  fixity  of  that  relation 
Is  a  fixity  of  exchange-value. 

tZ>'  une  mithode,  p.  12.  XEUments,  2d  ed.  p.  431. 

II  Ibid.  pp.  443-4.  *»Cf.  ibid.  p.  449. 


EXCHANGE- VALUE   ADVOCATES  187 

Walras,  like  those  economists,  wants  in  money  the 
nearest  possible  approach  to  invariabilitj'-  in  exchange - 
value,  and,  nnlike  the  latter,  thinks  this  object  attainable 
and  worth  striving  for.  But  it  is  unfortunate  he  does 
not  use  terms  showing  that  while  he  wants  variation  of 
money  in  one  kind  of  value,  he  wants  invariability  of 
money  in  another  kind  of  value.  The  title  of  his  memoire 
read  before  the  Vaudois  Society  was,  "Of  a  method  for 
regulating  the  variation  of  the  value  of  money."  Thus  he 
tells  people  that  what  he  thinks  desirable  in  money  is  a 
certain  variation  of  its  "value,"  instead  of  saying  that 
what  he  wants  is  invariability  of  its  exchange -value. 
This  does  not  do  justice  to  his  own  thought.  It  is  mis- 
leading and  it  has  misled.  In  a  criticism  of  Professor 
Walras's  scheme  Mr.  Adolph  Coste  repudiates  the  idea 
that  money  should  be  variable  in  "value,"  and  even  that 
its  "value"  should  vary  with  the  mean  variation  of  the 
"values"  of  commodities,  affirming,  with  all  economists, 
that  what  is  wanted  in  money  is  "fixity  of  value."* 
Here  is  mere  logomachy,  and  Professor  Walras  has 
needlessly  put  himself  in  the  wrong  by  his  imperfect 
terminology.  Mr.  Coste  wants  the  "value"  of  money  to 
be  steady  while  the  "values"  of  commodities  fall.  He 
wants  invariability  in  the  esteem -value  (or  cost -value) 
of  money.  Professor  Walras  wants  the  "value"  of 
money  to  fall  with  the  average  of  the  "values"  of  com- 
modities. He  wants  invariability  in  the  exchange -value 
of  money.  And  just  as  Professor  Walras  wants  vari- 
bility  in  the  esteem -value  of  money,  so  Mr.  Coste  wants 
variability  in  the  exchange -value  of  money.  If  the  bare 
term  "value"  be  used,  as  it  has  been  used,  professedly, 


*Note  sur  un  projet   de  reforme  inon6taire   de  M.  L^on  Walras,  in 
Les  questions  contemporaines,  Paris,  1886,  p.  565. 


188  HISTORICAL    SUB  VET 

by  economists  without  end,  in  the  sense  of  exchange- 
value,  it  is  Professor  Walras  who  wants  money  to  be 
invariable  in  "value."  But  if  this  term  be  used  in  a 
novel  and  unacknowledged  confinement  to  the  meaning 
of  esteem -value,  then  it  is  Mr.  Coste  who  wants  money 
to  be  invariable  in  "value."  It  is  this  use  of  the  term 
adopted  by  Professor  Walras  himself  that  puts  an 
appearance  of  right  on  the  side  of  Mr.  Coste.  Yet  the 
difference  in  real  opinion  between  these  two  economists 
is  evidently  not  to  be  decided  by  the  mere  use  of 
a  term. 

Rather  curiously,  the  subject  has  been  treated  in  a 
similar  manner  by  another  economist,  but  with  the  same 
result  reached  from  the  cost -of -production  standpoint. 
In  his  Conversations  on  the  Principal  Subjects  of  Political 
Economy,  Philadelphia,  1882,  Mr.  William  Elder  says 
"it  is  the  labor -cost  of  production  that  rules  the 
exchange  -  value  "  of  commodities  (p.  119),  and  gold  and 
silver  "have  a  certain  approach  to  constancy  of  value, 
because  the  cost  of  their  production  does  not  vary  much 
within  the  periods  that  private  contracts  for  payment 
usually  run"  (p.  122).  Yet,  although  he  admits  that 
debts  ought  to  be  paid  in  the  same  "value"  in  which 
they  were  contracted  (p.  162),  he  departs  from  "value" 
in  the  sense  of  cost -value,  and  really  wants  money  to 
fall  in  such  value,  as  he  says  it  is  proper  that  money 
shall  become  cheaper  along  with  other  commodities  (pp. 
162-3),  and  does  not  find  fault  with  gold  and  silver  for 
depreciating  so  long  as  their  cheapening  is  not  faster 
than  the  cheapening  of  goods  (p.  161,  cf.  p.  162),  and 
speaks  of  a  fall  in  the  cost  of  production  of  money  as  a 
blessing,  lightening  the  burden  of  debts  (p.  118).  He, 
too,  thus  wants  money  to  fall  in  the  only  kind  of  value 


EXCHANGE- VALUE   ADVOCATES  189 

which  he  calls  "  value ; "  and  yet  he  really  wants  it  to  be 
stable  in  exchange -value. 

§6.  We  have  now  come  to  the  bimetallic  era. 
Almost  all  the  bimetallists  —  the  few  exceptions  have 
already  been  noticed — hold  that  money  ought  to  be 
stable  in  exchange -value.  Wolowski,  the  founder  of 
the  modern  theory  of  bimetallism,  laid  much  emphasis 
upon  the  need  of  money  being  stable  in  "value,"  and  of 
the  duty  of  making  it  as  nearly  so  as  possible,*  calling 
this  the  economic  problem,  or  the  problem  of  economic 
fixity,  in  distinction  from  the  mere  keeping  of  the  coins 
invariable  in  weight,  which  he  called  the  technical  prob- 
lem, or  the  problem  of  material  fixity. t  But  he  made 
no  reference  to  a  difference  of  meaning  in  the  term 
"value,"  and  so  it  is  not  plain  on  the  surface  which  kind 
of  value  he  had  in  mind.  Some  passages,  however, 
show  that  he  meant  exchange -value,  as  when  he  says 
people  sell  goods,  not  for  a  certain  quantity  of  a  certain 
metal,  but  for  purchasing  power  (pp.  49-50),  and 
again,  when  he  says  falling  prices  are  much  worse  than 
rising  prices  (p.  152).  The  same  may  be  said  of  the 
other  protagonist  of  bimetallism,  Ernest  Seyd,  who 
vainly  warned  against  the  danger  of  falling  prices. 
The  later  advocates  become  more  definite.  +  Cernuschi, 
the  champion  of  international  bimetallism,  spoke  plainly 
of  wanting  prices,  and  the  purchasing  power  of  money, 
to  be  stable. II  The  clearest  teaching  on  the  subject  was 
made  by  Dana  Horton,  who  introduced  bimetallic  theory 


* L'or  et  V argent,  Paris,  1870  (a  collection  of  papers  written  between 
18G5  and  1870),  pp.  iv,  xxi,  xxx,  6,  24,  222,  248,  275,  277,  Enquete  p.  95. 

flhid.  pp.  xvii,  20-1,  cf.  p.  50. 

J  The  clearly  expressed  views  of  Prince-Smith,  the  leader  of  bimet- 
allism in  Germany,  have  already  been  noticed. 

II  E.  g.  in  Nomisma,  or  legal  tender,  New  York,  1877,  pp.  16,  17. 


190  HISTORICAL    SURVEY 

in  America.  Horton  had  no  conception  of  "value" 
except  as  exchange -value,  determined  in  the  case  of 
money  by  the  average  of  prices,*  without  regard  to  the 
special  causes  affecting  the  prices  of  particular  com- 
modities, t  and,  calling  the  multiple  standard  a  "stand- 
ard of  desiderata,"!  he  looked  upon  it  as  "the  key  to 
the  entire  theory  of  money."  II  The  normal  supply  of 
money  he  defined  as  "that  supply  which  will  keep  a 
general  level  of  prices  constant,"**  and  maintained  not 
only  that  "equity  demands  that  the  average  of  general 
prices  shall  be  the  guide,"  but  that  "the  desideratum 
for  the  interest  of  a  people  is  that  the  value  of  money 
should  remain  on  the  average  permanent. "ft  His  whole 
doctrine  is  summed  up  in  these  words:  "As  to  the  general 
proposition,  that  it  is  the  duty  of  the  State  to  maintain 
good  money,  I  doubt  whether  there  are  responsible  dis- 
putants who  would  commit  themselves  unequivocally 
against  it.  Nor  are  there  many  who  will  undertake  to 
deny  that  the  permanent  quality  of-  good  money  is 
stability  of  value,  or  that  the  more  important  signifi- 
cation of  stability  of  value  lies  in  stability  of  average 


*  Silver  and  gold,  Cincinnati,  ]876,  second  edition,  1895,  p.  68. 

fThe  silver  pound,  London,  1887,  p.  5n.  He  here  says  "The  plain 
meaning  of  appreciation  is  the  rise,  let  us  say,  of  gold  relatively  to 
things  vendible,  which  takes  place  as  prices  fall;  depreciation  is  that 
fall  of  gold  which  takes  place  as  prices  rise,"  and  denounces  as  a 
"fallacious  use"  "the  effort  to  appropriate  the  words  for  certain  special 
instances  of  rise  or  fall  of  prices;  so  that,  for  example,  they  shall  only 
be  used  when  the  speaker  thinks  the  change  has  been  produced  by  cer- 
tain special  causes,  or  when  he  thinks  it  is  permanent,  or  that  it  is  pro- 
gressive." 

X  Silver  and  gold,  p.  37;   The  silver  pound,  pp.  3-6. 

II  Silver  and  gold,  p.  40. 
**Ibid.  p.  69;  cf.  Silver  in  Europe,  New  York.  1890,  p.  82. 
ff  Silver  and  gold,  pp.  42  and  70-1  respectively. 


EXCHANGE-VALUE   ADVOCATES  191 

purchasing  power."*  In  general  it  may  be  said  of  these 
leaders,  and  also  of  most  of  their  followers,  that  they 
present  the  appearance  of  being  bimetallists  because  they 
hold  this  doctrine  about  the  need  of  stability  of  money 
in  exchange -value;  while  even  the  best  of  their  militant 
opponents,  so  far  as  they  combat  this  doctrine,  give  the 
impression  of  holding  that  money  should  be  stable  in 
some  other  kind  of  value  (they  are  not  particular  as  to 
which),  because  they  are  advocates  of  the  gold  standard 
or  of  the  status  quo. 

§7.  By  now  the  idea  that  "value"  means  exchange- 
value,  and  that  money  should  be  stable  in  such  value, 
has  become  so  general  as  to  seem  almost  to  be  the 
orthodox  doctrine.  For  the  majority  of  theoretical 
economists,  without  regard  to  their  attitude  toward 
bimetallism,  have  insensibly  come  to  adopt  this  posi- 
tion. In  reviewing  these  economists  we  may,  however, 
divide  them  into  those  who  favor  bimetallism  and 
those  who  are  lukewarm  or  who  more  or  less  strongly 
oppose  it. 

Among  the  former  belongs  the  late  Professor  Sidg- 
wick,  who,  in  his  Principles  of  Political  Economy, 
London,  1883,  paid  considerable  attention  to  this  sub- 
ject. Of  J' value"  he  conceived  mostly  as  exchange- 
value  (cf.  p.  57),  and  would  expressly  confine  the 
phrase  "the  value  of  money"  to  purchasing  power,  or 
"exchange  value  measured  in  commodities  other  than 
money"  (p.  248),  or  "exchange  value  relatively  to 
goods"    (p.    260).      He   distinguished    Ricardo's  "real 


*  The  Silver  pound,  p.  33.  Similarly  in  Proceedings  of  the  Inter- 
national Monetary  Conference,  in  Paris,  ISSl,  Cincinnati,  1881,  p.  312; 
he  here  prefers  depreciation  to  appreciation. 


192  HISTORICAL    SURVEY 

value"  from   his  "exchangeable  value,"  and   the   two 
ways  of  measuring  them,  and  (like  Torrens  and  Bailey) 
criticized    Ricardo   for   not    perceiving   the   distinction 
(p.  60).     Although    he  himself  was  willing  to  accept 
this  conception  of  "real  value,"  so  as  to  say  that  when 
things  are  produced  with  less  labor  they  have  grown 
"really  cheaper"  (p.  61),  yet  he  considered  knowledge 
of  such  variation   in  the  "real  value,"  or  cost  of  pro- 
duction, of  a  given  ware,   though  interesting  and  im- 
portant for  some  purposes,  to  be  of  little  assistance  "in 
measuring  its  variations    in   exchange  value  relatively 
to  things  in  general"  (p.  62).     It  is  variation  in  such 
exchange -value  that  he  thought  we  all  mean  when  we 
speak    of   a   thing    having    fallen    in   "value,"   and   he 
thought  "we    should   commonly   speak   of   a   thing   as 
having   fallen   in  value,  when   we   found   that   it   had 
fallen  relatively  to   all    other  things,   even  though  we 
might  know  the  change  to  be  due  to  causes  affecting 
primarily  these   other  things"  (p.   59).     He    therefore 
devoted  some  space  to  describe  a  method  for  measur- 
ing variations  in  the  "value,"  or  purchasing  power,  of 
money  by  means  of  prices  (pp.  66-8).     He  would  seem, 
although  here  he  is  not  clear,  to  make  no  use  of  wages 
in    his   lists    (see    pp.   69,   79-80).      The   single  wages 
standard,   at  all  events,  he  flatly  rejected,  saying  that 
"when  we  ask  whether  gold  or  anything  else  has  risen 
in  value,"  we  certainly  "do  not  mean  to  inquire  whether 
it  will  purchase  more  of  a  certain  arbitrarily  selected 
kind  of  labor.     This,"  he  continued,  "maybe  in  itself 
an  interesting  question  to  investigate,  but  it  can  hardly 
be  maintained  to  be  the  real    meaning  of  the  former 
question,  and  it  is  no  solution  of  the  difficulties  of  the 
first  problem  to  substitute  for  it  the  second"  (pp.  63-4). 


EXCHANGE- VALUE   ADVOCATES  193 

We  may  be  sure,  then,  that  when  he  spoke  of  "stability 
of  value  "  as  a  requisite  in  money,  and  wanted  the  State 
"to  guard  so  far  as  it  can  against  fluctuations  in  the 
value  of  the  medium  of  exchange,"  and  recommended 
bimetallism  as  preferable  to  monometallism  on  this  ac- 
count (p.  453),  he  meant  by  "value"  exchange- value. 
In  him,  in  fact,  is  seen  the  force  of  the  popular  usage 
of  words  overcoming  the  authority  of  the  masters  of 
English  economics. 

Professor  J.  Shield  Nicholson  throughout  his  Trea- 
tise on  Money  and  Essays  on  present  monetary  problems, 
Edinburgh,  1888,  conceives  of  "value"  only  as  purchas- 
ing  power  over  "things  in  general"  (pp.  30-1),  and 
says  "it  cannot  be  too  often  insisted  on  that  the  real 
meaning  of  the  value  of  money  is  its  value  as  compared 
with  things  in  general  — that  is,  its  value  as  determined 
by  the  general  level  of  prices"  (p.  63),  varying  inversely 
with  them  (pp.  45-6,  61-2,  226).  In  money  he  wants 
"stability  of  value"  (p.  25),  or  such  a  steadiness  of  its 
relation  to  things  in  general  that  "the  general  level  of 
prices"  maybe  steady  (cf.  pp.  226-7);  and  he  recom- 
mended bimetallism  as  conducing  to  greater  stability 
of  the  general  level  of  prices  (pp.  233,  246,  273,  275). 
He  has  also  devoted  a  paper  to  develop  a  method  for 
"The  Measurement  of  Variations  in  the  Value  of  the 
Monetary  Standard,"  entirely  confined  to  measuring  its 
purchasing  power  by  means  of  prices  (pp.  298-331), 
without  regard  to  special  causes  affecting  particular 
prices  (pp.  330-1,  cf.  pp.  63,  335-6).  Labor,  he  no- 
ticed, "in  passing,"  is  to  be  rejected  as  a  standard  unit 
for  measuring  value,  because  of  the  improvement  in  its 
efl&ciency  which  is  constantly  being  made  (p.  322,  cf.  p. 
22) — the  same  reason  that  we  have  already  seen  later 

M 


194  HISTORICAL    SURVEY 

eraploj'ed  by  Professor  Ross  and  others.*    Yet  he  would 
include  wages  in  the  lists. t 

In  Principles  of  Economic  Philosophy  an  economist 
likewise  favoring  bimetallism  for  providing  money  more 
stable  in  "value"  (p.  368),  and  making  "a  better  equi- 
poise against  commodities"  (pp.  363-4),  the  late  Mr. 
Van  Buren  Deuslow,  although  defining  "value"  as  a 
degree  of  comparative  esteem  (p.  79),  and  "natural 
value"  as  value  thought  to  be  possessed  by  a  commodity 
"by  reason  of  the  labor  spent  in  producing  it"  (p.  107), 
yet  denied  that  labor  can  be  a  measure  of  value  (p.  85), 
and  took  even  "intrinsic  value"  in  the  sense  of  general 
exchange- value,  defining  it  as  "the  permanent  value  a 
commodity  has  when  measured  in  the  average  of  other 
commodities"  (p.  107). t  He  judged  the  fitness  of  the 
precious  metals  to  serve  as  money,  by  their  greater  or 
less  stability  in  value  "relatively  to  other  commodities" 
(p.  344),  and  also  "relatively  to  labor  and  commodi- 
ties" (p.  345).  Thus  he  was  not  so  precise  as  might 
be  desired  in  his  conception  of  "value"  as  exchange- 
value;  but  it  is  evident  that  he  used  the  term  in  this 
sense,  and  wanted  money  to  be  stable  in  this  kind  of 
value. 


*In  his  Evidence  before  the  Gold  and  Silver  Commission  he  wavered 
somewhat  on  the  question  whether  appreciation  of  money  is  not  good  if 
arising  from  causes  residing  in  commodities,  First,  report,  1887,  qq. 
4037,  4050,  5705-6;  but  not  so  qq.  4154,  5403,  5419,  5421,  where  he  wants 
tlie  standard  to  be  stable  in  purchasing  power,  and  qq.  5708,  5710,  where 
he  wants  the  currency  to  increase  with  the  increase  of  commodities. 

fOp.  cit.  q.  5448,  and  in  Principles  of  political  economy.  Vol.  II. 
18D7,  p.  5.  In  this  last  work,  while  still  saying  that  stability  of  value 
(conceived  as  exchange-value)  is  an  important  requisite  in  money,  p.  18, 
he  seems  to  find  little  practical  consequence  in  its  deviation.  Vol.  III. 
1901,  pp   G3-4. 

X  But  on  p.  350  he  said  the  "intrinsic  value  "  of  gold  and  silver  "keeps 
parallel  with  the  cost  in  labor  of  producing." 


EXCHANGE-VALUE    ADVOCATES  195 

Most  definite  on  our  subject  was  Professor  Sherwood, 
who  accepted  at  least  the  theory  of  international  bimet- 
allism. In  his  History  and  Theory  of  Money,  Philadel- 
phia, 1893,  of  money  in  deferred  payments  he  said: 
"Any  system  of  credit  or  deferred  payments  must  rest 
upon  the  certainty  that  a  person  who  waits  for  payment 
until  some  future  day  shall  then  receive  the  same  value 
which  he  would  have  received  if  the  transaction  had 
been  consummated  at  once"  (pp.  58-9);  wherefore 
"stability  of  value  is  the  great  requisite  of  a  money 
which  is  to  be"  the  standard  for  this  purpose  (p.  59). 
Hereupon  he  judged  of  the  proper  volume  of  money  in 
a  country  as  that  which  is  enough  to  keep  prices  about 
even  (p.  97) ;  and,  after  asserting  that  government  has 
some  power  over  the  value  of  money  (pp.  219-20),  he 
said:  "The  ideal  that  we  want  so  far  as  price  adjust- 
ment is  concerned,  is  to  keep  prices  stable,  so  that  a 
contract  which  is  payable  in  one  year  from  now  can  be 
paid  with  just  the  amount  of  commodities  which  will 
then  represent  the  value  stated  in  the  contract  of  to-day. 
That  is  what  we  want, —  a  stability  of  prices  that  per- 
sists from  one  year  to  another,  and  from  one  generation 
to  another.  .  .  .  The  object  at  which  we  aim  is,  as 
it  seems  to  me,  a  currency  which  shall  keep  prices  stable, 
a  currency  which  shall  expand,  therefore,  with  the 
expansion  of  trade  and  commerce  and  development 
generally"  (p.  225).  And  again  he  reiterates:  "Sta- 
bility of  prices  is  the  ideal  sought"  (p.  889). 

And  in  a  work  entitled  Money  and  its  Relation  to 
Prices,  being  an  inquiry  into  the  causes,  measurement, 
and  effects  of  changes  in  general  prices,  London,  1896, 
Mr.  L.  .L.  Price  has  likewise  confined  his  use  of  the 
.term  "value"  literally  to  the  sense  of  exchange -value, 


196  HISTORICAL    SURVEY 

and  has  taken  "  variation  in  the  value  of  money  "  to  be 
synonymous  with  a  variation  of  its  purchasing  power, 
or  inverse  alteration  in  general  prices  (cf.  pp.  10-11,  37, 
156,  etc.),  whether  the  cause  lie  on  the  side  of  commodi- 
ties or  on  the  side  of  money  (cf.  pp.  66-7,  114-15),  the 
question  of  causes  forming  a  separate  inquiry  (as  on  pp. 
176-8).  Therefore,  early  in  the  work,  he  asserts  that 
justice  demands  repayment  of  a  debt  in  the  same  "pur- 
chasing-power" as  was  loaned  (p.  40),  This  is  said 
without  argument ;  but  his  later  inquiries  into  the  effects 
of  changes  in  the  general  level  of  prices  give  a  rational 
and  empirical  basis  for  this  position,  marred  only  by 
lack  of  consideration  of  the  claims  for  the  advantages  of 
stability  of  money  in  other  kinds  of  value.  It  deserves 
notice  that  Mr.  Price  clearly  recognizes  that  wages 
should  be  excluded  from  the  list  of  articles  whose  prices 
are  averaged  (p.  175).  He  wants  the  general  level  of 
prices  to  be  stable  and  wages  to  rise,  and  if  this  cannot 
be,  he  prefers  rising  prices  with  higher-risiug  wages  to 
falling  prices  with  stationary  wages  (pp.  59-61).  His 
standard  is  solely  the  commodity  standard.  He  con- 
cludes in  favor  of  bimetallism,  the  influence  of  which 
toward  steadying  prices  he  proves  to  the  extent  the  sub- 
ject admits  of  proof  (pp.  161-7,  180-1). 

§8.  Among  the  economists  unfavorable  to  bimetal- 
lism, who  nevertheless  hold  that  the  value  in  which 
money  ought  to  be  stable  is  exchange -value,  the  first 
place  may  be  accorded  to  Professor  A.  L.  Perry.  In 
the  numerous  editions  and  replicas  of  his  first  work,  the 
Elements  of  Political  Economy,  New  York,  1865,  Pro- 
fessor Perry  has  remained  faithful  to  the  position  that 
political  economy  is  the  science  of  exchanges,  or  what 
he  considers   the  same  thing,  of  "value,"  consistently 


EXCHANGE- VALUE   ADVOCATES  197 

using  this  term  in  the  sense  of  exchange -value  only. 
In  fact,  he  proclaims,  faintly  echoing  Mohammet,  that 
"value  is  value,  and  there  is  only  one  kind  of  it,"*  and 
always  defines  this  one  value  in  any  of  three  different 
forms,  which  agree  at  least  in  being  applicable  only  to 
exchange-value,  extended  to  cover  services  in  general.! 
Thus  he  says:  (1)  "the  value  of  anything  is  something 
else  already  exchanged  for  it;t  (2)  "value  is  the  relation 
of  mutual  purchase  established  between  two  things,"  or 
"between  two  services;"  11  (3)  "value  is  the  relative 
poiver  which,  one  thing  has  of  purchasing  other  things."  ** 
Likewise  he  repeats  that  "it  is  not  possible  that  there 
should  be  any  general  rise  or  fall  of  values; "ft  and 
asserts  that  improvements  in  production,  which  reduce 
labor-costs,  affect  the  values  not  only  of  the  articles 
directly  affected  but  also  of  other  things  exchanged  for 
them, It  so  that  "no  effect  at  all  is  produced  on  values,  if 
the  improvements  have  gone  on  equally  in  all  directions," 
since  now  "everything  exchanges  just  as  before,"  |||| — 


^Elements,  5th  edition,  1869,  p.  227,  Introduction  to  political  economy, 
1877,  ed.  of  1881,  p.  32. 

tThe  term  "service"  is  used  by  Perry,  as  by  so  many  other  econo- 
mists of  Bastiat's  following,  in  the  senses  both  of  (1)  satisfaction  ren- 
dered to  a  person,  and  of  (2)  effort  exerted  by  a  person— e.  g.  Elements, 
pp.  57,  Gl,  67,  76,  111,  etc.  If  we  eliminate  the  second  meaning,  as 
something  distinct,  really  being  the  same  as  labor,  which  is  of  no 
utility  or  value  in  itself,  the  conception  of  exchange-value  is  given  its 
proper  connotation,  and  is  freed  from  overlapping  with  cost-value  or 
esteem-value. 

lElements,  p.  49;  similarly  Introduction,  pp.  27,  39,  Principles  of 
political  economy,  1890,  p.  4C. 

II  Elements,  pp.  49,  56;  so  also  Introduction,  p.  40,  Principles,  p.  46. 
**Elements,  p.  51,  cf.  p.  77,  and  Introduction,  pp.  25,  26. 
ffElements,  p.  78;  Political  economy,  1873,  edition  of  1887,  p.  152, 
Introduction,  p.  65,  Principles,  pp.  49-50. 
ttE.  g.  Elements,  p.  224. 
UElements,  p.  110.    On  p.  79,  making  the  supposition  of  successive 


198  HISTOBICAL    SURVEY 

all  which  we  know  to  be  true  only  of  exchange -value. 
Treating  of  money  in  its  function  of  a  standard,  although 
denying  the  possibility  of  our  having  any  perfect  meas- 
ure of  "value,"  he  admits  we  can  obtain  "a  sort  of 
rough  guide  to  the  power  of  a  thing  to  purchase  things 
in  general."*  Consequently,  while  "the  denominations 
of  money,  which  is  the  best  attainable  measure,  can 
never  have  a  meaning  absolutely  fixed,  but  slide  up  and 
down  the  scale  along  which  the  purchasing  power  of 
money  as  a  medium  is  moving,"  t  yet,  within  the  limits 
attainable,  "the  only  way  to  keep  the  denominations 
steady  in  meaning  is  to  keep  the  medium  steady  in  pur- 
chasing power."  X  No  wonder,  then,  that  he  tells  us,  not 
merely  that  money  ought  to  be  stable  in  "value,"  ||  but 
that  when  a  debt  is  due  him  he  wants  back  "just  as 
much  purchasing  power  as  I  loaned,  with  the  interest 
on  the  same,"  **  and  that,  in  like  manner  as  other  meas- 
ures ought  to  be  steadfast  in  their  peculiar  qualities, 
"so,  as  far  as  it  is  possible  in  the  nature  of  things, 
ought  the  medium  and  hence  the  measure  of  values  to 
represent  j-ear  in  and  year  out  a  uniform  degree  of 
purchasing  power."  tt 

improvements,  he  says:  "As  soon  as  the  improvements  affect  all  the 
commodities  equally,  value  stands  just  as  it  did  before  the  first  improve- 
ment was  made;"  which  is  repeated  in  the  same  words  in  Political 
economy,  p.  153. 

*Introduction,  p.  64.  ^Elements,  p.  224. 

Xlntrodiiction,  p.  288.  This  is  in  a  summary  at  the  end  of  a  chapter. 
Curiously,  the  original  passage  reads:  "The  only  way  to  keep  the 
measure  of  values  steady  is  to  keep  that  tiling  steady,  whose  denomina- 
tions furnish  the  measure,"  p.  238,  and  the  context  shows  that  what  is 
meant  is  fixity  of  the  intrinsic  value  of  money.  The  explanation  lies  in 
the  fact  that  he  regarded  gold  as  "the  steadiest  in  purchasing  power  of 
valuable  things,"  p.  288,  etc.,  and  considered  it  sufficiently  steady  for 
practical  purposes. 

WTntrodnction,  pp.  243-4,  Principles,  p.  395. 
**Elements,  p.  222.  ^Elements,  p.  225. 


EXCHANGE-VALUE   ADVOCATES  199 

Similarly  Mr,  A.  S.  BoUes,  in  his  Chapters  in  Politi- 
cal Economy,  New  York,  1874,  defined  "value"  as  an 
estiipate  placed  on  one  commodity  in  terms  of  another 
(p.  52),  and,  sayiiij,':  "This  rise  of  prices  [since  1849] 
represents  a  real  diminution  in  the  general  purchasing 
p^wer  of  gold  to  that  extent"  (p.  106),  treated  this  also 
as  a  decline  in  the  "value"  of  gold  (p.  107).  This 
decline  of  gold,  as  also  of  silver,  he  believed  would  con- 
tinue indefinitely  (pp.  108-12);  wherefore,  stability  of 
value  being  the  chief  requisite  in  money  (p.  114),  and 
the  material  indifferent  (p.  115),  he  thought  that  the 
reign  of  the  precious  metals  is  soon  to  cease  (p.  112)  and 
that  they  will  be  supplanted,  in  the  monetary  function 
of  measure  of  value  (divorced  from  the  function  of 
medium  of  exchange,  assumed  by  paper*),  by  some 
metal  more  stable  in  value,  as  for  instance  iron  (pp. 
115-16).  Exchange -value  is  also  the  idea  of  value 
etitertained  by  Professor  Simon  Newcomb.  In  an 
article  on  The  Standard  of  Value,  in  the  North  Ameri- 
can Review  for  September  1879,  Professor  Newcomb 
wrote:  "What  we  commonly  call  purchasing  power 
may  also  be  called  in  economical  language  absolute 
value"  (p.  225);  which  statement  he  repeated  in  his 
Principles  of  Political  Economy,  New  York,  1886,  by 
saying  that  "the  absolute  value  of  the  dollar  varies  in- 
versely as  the  scale  of  prices"  (p.  213). t     In  both  these 


*Cf.  Jevons. 

tNotice  also  the  heading  of  the  chapter  in  which  this  passage  occurs: 
"The  measure  of  value  by  an  absolute  standard."— lie  puts  aside  special 
causes;  for  he  places  the  one  cause  of  a  general  variation  of  prices  in 
variations  in  the  supply  and  demand  of  a  circulating  medium,  and  of 
credit,  The  standard,  p.  2?A;  and  he  expected  a  slow  appreciation  of 
gold,  arising  from  the  increasing  demand  for  it,  resulting  from  a  con- 
tinual increase  of  wealth,  pp.  228,  23G. 


200  HISTORICAL    SURVEY 

writings  he  favors  the  "multiple  standard  of  value,"  and 
approves  Lowe's  scheme  in  principle,  though  finding 
fault  with  its  probable  practice;*  and  he  would  rather 
have  some  means  of  procuring  stability  in  the  value  of 
money  itself,  as  by  altering  the  metallic  contents  of  the 
dollar,  or  the  quantity  of  bullion  in  which  credit  money 
is  redeemable. t  In  general,  although  inverting  the 
usual  order  and  preferring  appreciation  to  deprecia- 
tion, +  he  maintains  that  "all  we  want  is  a  dollar  of 
uniform  value,  as  measured  by  the  average  of  com- 
modities."11 

So  also  in  Germany,  in  his  work  Bas  Gelt,  Berlin, 
1873,**  when  treating  of  the  various  functions  of  money, 
among  which  is  its  serving  as  the  "measure  of  value" 
(Wertmass,  p.  9),  Professor  Knies  occasionally  shows 
that  he  would  measure  this  measure  itself  by  the  changes 
in  prices,  or  by  the  quantities  of  commodities  purchas- 
able with  a  given  sura  (cf.  pp.  174,  189),  and  that  he 
views  its  proper  functioning  to  be  its  remaining  stable 
in  exchange- value. tt  And  in  France,  Professor  Jour- 
dan,  in  his  Corns  analytique  d'Econcmie  politique,  Paris, 
1882,  has  defined  "value"  as  purchasing  power  (p.  426, 
cf.  pp.  438,  464,  467),  measurable  by  the  quantity  of 
any  commodity  exchanged  for  the  thing  in  question 
(p.  431,  cf.  p.  437),  and,  in  the  case  of  money,  in- 
versely by  prices  (cf.  p.  466).  He  rejects  labor  as  a 
standard  of  value  (p.  438),  and  says  that  a  rise  or  fall 
of  all  "values"  is  inconceivable  (p.  435).     He  thus  uses 

*The  standard,  pp.  226,  228,  234;  Principles,  p.  214. 

fThe  standard,  pp.  235-7. 

tTbid.  pp.  230-3.  ||  Ibid.  p.  234. 

♦♦References  are  to  the  second  edition,  revised,  Berlin,  1885. 
ttTauschwert,  pp.  16,  173,  189,  190-1,  cf.  p.  336;  Verkehrswert,  p. 
172;  Sachwert,  pp.  190,  435;  Vermogenswert,  p.  416. 


EXCHANGE- VALUE   ADVOCATES  201 

"value"  consistently  in  the  sense  of  exchange -value. 
It  is  in  this  sense  that  he  speaks  of  a  "great  uniformity 
of  value"  as  a  quality  in  the  precious  metals  fitting 
them  to  serve  as  money,  believing  that  between  their 
rare  perturbations  there  are  permanent  price -levels 
(p.  461).  Again,  in  England,  Lord  Goschen,  in  his 
paper  On  the  Probable  Results  of  an  Increase  in  the 
Purchasing  Power  of  Gold,  in  the  Journal  of  the  Insti- 
tute of  Bankers,  London,  May  1883,  avoided  the  am- 
biguity of  the  term  "value"  by  confining  himself  to 
speaking  of  variations  of  prices,  or  of  the  purchasing 
power  of  money;  but  showed  that  he  viewed  stability 
of  purchasing  power  (or  exchange -value  proper)  as  the 
correct  condition  in  money  (see  especially  pp.  284,  285, 
306).  In  his  earlier  Theory  of  the  Foreign  Exchanges 
(eighth  edition  1875),  he  had  used  the  term  "deprecia- 
tion" in  the  sense  of  "smaller  purchasing  power" 
(p.  63),  or  rise  of  prices  (p.  65). 

§  9.  Finally,  there  are  even  militant  anti-bimetallists 
who  have  used  "value"  in  the  sense  only  of  exchange- 
value,  and  have  expressed  desire  that  money  should  be 
stable  in  this  kind  of  value. 

Dr.  Theodor  Hertzka,  who  was  for  a  long  time  an 
untiring  advocate  of  the  single  gold  standard,  has  all 
along  held  this  position.  In  his  two  earlier  tracts.  Die 
Goldrechmmg  in  Osterreich-Ungarn,  Vienna,  1879,  and 
Das  Wesen  des  Geldes,  Leipzig,  1887,  he  laid  emphasis 
upon  the  need  of  money  having  "constancy"  or  "relative 
constancy  of  value"  as  its  "cardinal  property,"  because 
of  its  being  the  measure  of  value  (1st,  p.  12;  2d,  p.  16) ; 
and  indicated  that  by  "value"  he  meant  exchange -value, 
not  only  by  employing  this  term  in  connection  with  the 
term  "purchasing  power"    (Tausch-  or  Kaufkraft)    in 


202  HISTORICAL   SURVEY 

other  passages  to  the  same  effect  (2d,  pp.  5,  17,  22), 
but  especially  by  making  the  statement  we  have  seen  in 
Serope,  that  constancy  of  cost  of  production  of  the 
money  material  will  cause  constancy  of  its  "value"  only 
if  there  be  similar  constancy  in  the  cost  of  production  of 
other  things,  and  that  what  is  wanted  in  order  for  the 
purchasing  power  of  money  to  remain  stable  is  neither 
fixity  of  its  cost  of  production  nor  fixity  of  its  supply, 
but  variation  of  both  these  factors  in  proportion  to  the 
variation  of  the  same  factors  in  the  mass  of  goods  (2d, 
p.  37).  That  this  publicist  recommended  the  adoption 
of  the  gold  standard  in  Austria -Hungary,  was  due  to 
his  preferring  for  his  country  a  money  which  should 
keep  its  value  at  the  same  level  with  the  value  of  the 
money  of  its  commercial  neighbors,  and  to  his  laying 
much  stress  also  upon  the  quality  in  money  of  conve- 
nience in  handling.  Later  he  modified  these  views,  and  in 
his  pamphlet.  Das  internaiionale  Wahrungspro'blem  nnd 
{lessen  Lb'sung,  Leipzig,  1892,  he  advocated,  for  all  the 
world,  a  composite  gold -and -silver  standard,  resembling 
Professor  Marshall's  symmetallism.  In  this  work  he 
even  goes  so  far  as  to  prefer  before  constancy  of  ex- 
change-value a  slow  and  gradual  depreciation  of  money, 
or  rise  of  prices,  although  recognizing  that  this  violates 
the  ideal  of  a  measure  of  value  (pp.  8-9).  In  this 
position,  however,  constancy  of  exchange -value  is  still 
made  the  norm,  and  especially  is  repudiated  any  leaning 
toward  the  standard  of  cost-value  or  esteem-value. 

In  America  many  slips  into  this  position  may  be 
found  in  the  recent  careless  campaign  litei'ature  on  the 
subject.  The  most  emphatic  and  really  serious  among 
the  writers  of  this  period  is  Mr.  W.  L.  Trenholm,  who, 
in    The   PeopWs  Money,   New   York,    1893,    frequently 


EXCHANGE- VALUE    ADVOCATES  203 

insists  that  money  ought  to  be  stable  in  vahie  (pp.  49, 
80,  103),  and  that  justice  demands  that  debts  should  be 
paid  in  the  same  value,  value  being  the  essence,  the 
denomination  and  the  substance  naught  (p.  112).  He 
furthermore  definitely  states  that  what  is  desired  is 
stability  of  purchasing  power  (p.  85),  and  most  un- 
equivocally that  "the  practical  test  of  stability  in  the 
value  of  the  monej^  in  use  is  general  stability  in  prices" 
(p.  88),  without  any  reservation  about  the  causes  of 
changes,  expressly  rejecting  any  other  test.  Once, 
however,  he  says  that  what  is  wanted  is  stability  in 
"real  value"  (p.  108),  and  asserts  that  stability  of 
value  is  assured  if  one  metal  be  used  by  all  the  world 
and  a  fixed  unit  of  this  be  established  in  every  country 
permanently  (pp.  84,  88,  105);  which  is  fixity  merely  of 
intrinsic  value.  But  towards  the  end,  again,  after 
rejecting  the  labor  standard  (pp.  249-53),  he  offers  as 
one  reason  in  favor  of  the  single  gold  standard  the  alle- 
gation that  gold  is  more  stable  than  silver  in  purchasing 
power  (p.  261). 

In  a  paper  included  in  a  book  entitled  A  Dollar 
worth  a  Dollar,  New  York,  1895,  Professor  W.  R. 
Webb  wrote:  "A  standard  of  value,  invariable,  immu- 
table, always  possessing  the  same  purchasing  power,  is 
the  ideal"  (p.  76);  and  gave  this  as  a  reason  rather  for 
not  altering  the  monetary  standard  now,  than  as  a  reason 
for  preferring  gold  to  bimetallism  in  general.  In  a 
paper  on  the  Quality  of  Money  and  Wages,  in  the  New 
York  Reform  Club's  publication  called  Sound  Currencj', 
for  Sept.  1st  1895,  Mr.  F.  L.  MeVey  regards  "stability 
of  value"  as  "an  essential  quality  of  a  medium  which  is 
to  be  permanently  used"  (p.  3),  and  says  "the  quality 
of  money  is  indicated  by  its  purchasing  power"  (p.  2), 


204  HISTORICAL    SURVEY 

and  always  treats  "appreciation"  and  "depreciation"  as 
variations  in  prices  (pp.  5,  8,  9,  etc.).  He  makes,  how- 
ever, the  curious  statement  that  "the  greater  the  pur- 
chasing power  of  a  piece  [of  money]  of  a  given  denomi- 
nation, the  'better'  the  money  is  said  to  be"  (p.  2),* 
aud  advocates  the  gold  standard  in  preference  to  the 
silver  standard  because  he  thinks  appreciation  better  for 
the  working  classes,  their  wages  falling  less  than  prices, 
so  that  the  purchasing  power  of  their  wages  increases. 
But  this  may  be  interpreted  merely  as  preference  for 
appreciation  before  depreciation,  with  use  of  stability  of 
exchange-value  still  as  the  norm.  Another  writer,  Mr. 
C.  S.  Patterson,  presenting  An  Argument  for  the  Gold 
Standard,  in  Present  Problems,  New  York,  Feb.  15th 
1897,  makes  a  statement  as  clear  as  his  argument:  "The 
standard  .  .  ,  must  have,  as  a  commodity,  as  stable  a 
market  value  as  possible,  and,  in  order  to  secure  the 
stability  of  the  market  value,  the  relation  between  the 
supply  and  demand  must  be  as  constant  as  possible," 
the  minor  premiss  following:  "Gold  alone  fulfils  these 
conditions"  (p.  9).t 


*  Perhaps  he  had  reference  to  the  following  statement  by  Edward 
Atkinson  in  an  earlier  issue  of  the  same  series,  July  1st  1896,  TJie  money 
of  the  nation  :  shall  it  be  good  or  bad?:  "What  every  man  wants  is  money 
which  will  buy  the  most  goods,  the  most  food,  the  most  fuel,  the  most 
clothing,"  p.  7.  It  may  be  noticed  that  in  Legal  tender  money,  in  the 
same  series,  Sept.  15th  1898,  Atkinson  repudiates  the  idea  that  currency 
should  be  regulated  with  a  A'iew  to  securing  stability  of  prices,  p.  310. 

tHe,  too,  says:  "The  best  money  is  the  money  of  greatest  purchas- 
ing power,''  p.  5. 


MEDIATORS  205 

CHAPTER   Vm 

MEDIATORS    BETWEEN    THE     TWO    STANDARDS 

§1.  Beside  the  economists  who  have  a  definite 
opinion  about  the  need  of  money  being  stable  in  one  or 
another  kind  of  value,  and  the  economists  who  are  con- 
fused between  the  needs  of  its  being  stable  in  "value"  in 
two  or  more  senses  of  the  term,  there  are  economists 
who  have  a  definite  opinion  about  the  propriety  of 
money  being  stable  in  a  mixture  of  two  kinds  of  value. 
These  are  avowed  mediators  between  the  commodity 
standard  of  exchange-value  and  the  labor  standard  of 
either  cost -value  or  esteem -value.  Some  have  desired 
to  mediate  exactly,  that  is,  to  adopt  a  position  halfway 
between  the  two  standards.  Others  have  been  content 
merely  with  some  midway  position,  inclining  perhaps 
more  on  the  one  side  than  on  the  other. 

A  position  merely  inclining  toward  the  labor  stand- 
ard from  the  commodity  standard,  attaching  itself_  more 
closely  to  the  latter,  we  have  seen  to  have  been  assumed 
by  Professor  Ross,  in  1892.  An  exactly  halfway  posi- 
tion between  the  two  standards  we  have  seen  adopted 
by  Mr.  Farquhar,  in  1895.  Another  attempt  seemingly 
toTmediate  equally  between  the  two  standards  we  have 
seen  to  have  been  made  by  Professor  Clark.  Professor 
Clark's  position  calls  for  a  few  words  of  criticism. 

Professor  Clark's  conception  of  the  standard  is  based, 
as  we  have  seen,  upon  the  idea  that  the  gains  from 
improved  production  should  be  divided  equally  between 
the  creditor  and  the  debtor.  The  doctrine  that  the  prod- 
uct of   a  normal  day  of  labor  will  do  this  is  based_by 


206  HISTORICAL    SURVEY 

him  upon  the  supposition  that  the  laborers,  when  they 
see  their  product  increasing,  will  take  the  advantage  so 
obtained  both  positively  and  negatively  —  positively  by 
getting  more  products,  negatively  by  expending  less 
labor.  And  for  this  standard  to  act  properly  it  is 
necessary  that  they  should  take  the  advantage  in  these 
two  ways  about  half  and  half.  BuJ  Pi'ofessor  Clark 
himself  contemplates  the  possibility  of  the  laborers  not 
taking  the  advantage  so  much  in  reduction  of  labor  as 
in  increase  of  products,  and  admits  that  then  his  ideal 
standard  will  have  "to  represent  slightly  less  than  the 
labor  day  practically  adopted,"  *  that  is,  will  have  to  be 
doctored  by  reference  to  the  commodity  standard.  He 
might  as  well  from  the  first  adopt  the  position  that  the 
ideal  unit  ought  to  be  such  as  to  command  an  average 
quantity  of  products  ever  increasing  at  a  rate  half  that 
at  which  the  average  productivity  of  labor  is  increasing, 
or,  reversely,  decreasing  at  half  the  rate  at  which  the 
average  productivity  of  labor  may  be  decreasing.  His 
standard  would  then  be  a  combination  of  the  commodity 
standard  and  of  the  labor  standard  (with  the  earnings 
of  labor  measured  in  hours  of  work).  That  such  a 
standard  can  be  obtained  automatically,  b}^  taking  the 
productivity  of  the  labor-day  as  the  standard,  because 
of  a  theory  that  laborers  naturally  divide  the  gains  of 
improved  productivity  half  positively  and  half  nega- 
tively, is  an  extraneous  doctrine,  interesting  as  theory, 
and,  if  true,  convenient  in  practice.  But  it  is  not 
necessary  in  practice,  since  the  same  end  may  be 
obtained  by  halving  the  results  of  the  commodity  stand- 
ard^ and  of  the  labor  standard,  separately  calculated. 
Nor  is  it  held  to  be  universally  true  in  theory  even  by 

*  Political  Science  Quarterly,  Sept.  1893,  p.  400. 


MEDIATORS  207 

Professor  Clark  himself.  Therefore  if  this  doctrine  is 
to  be  judged  by  the  aim  set,  it  is  much  more  defective 
than  the  methods  we  are  about  to  examine.  It  differs 
from  them,  we  may  add,  in  that  while  their  authors 
avow  that  they  do  not  want  money  to  be  stable  in 
value,  but  to  vary  half  in  exchange -value  and  half  in 
labor-value,  Professor  Clark's  intention  is  that  money 
should  be  stable  in  "value,"  and  he  thinks  it  would  gen- 
erally be  so  if  it  represented  the  same  labor  measured  by 
the  day  instead  of  by  the  hour.  It  would  seem  as  if 
such  money,  if  the  standard  were  carried  out  without 
the  doctoring  above  permitted,  really  would  be  stable  in 
esteem -value,  and  for  this  very  reason  it  would  not  be 
halfway  between  exchange -value  and  labor- value,  but 
would  be  a  species  of  labor-value  itself  (sometimes  more 
akin  to  cost-value  than  to  esteem -value).  On  the  other 
hand,  if  the  doctoring  were  introduced,  the  money  would 
vary  halfway  between  exchange -value  and  labor- value 
(cost-value),  and  would  no  longer  be  stable  even  in 
esteem -value. 

A  somewhat  similar  conclusion,  it  may  be  added, 
had  been  reached  by  Professor  Bohm-Bawerk  at  the  end 
of  an  article  entitled  The  Ulfimafe  Standard  of  Vahie, 
published  in  the  Annals  of  the  American  Academy  of 
Political  and  Social  Science,  Sept.  1894.  After  discuss- 
ing the  cost  theory  and  the  utility  theory  of  value,  which 
are  theories  properly  to  explain  the  relative  exchange- 
values  of  goods  and  of  labor,  he  rather  abruptly  ended 
with  the  assertion  that  while  the  ultimate  standard  of 
value  is  "human  well-being,"  a  concrete  statement  of 
this  must  rely  upon  the  two  standards  of  "the  utility 
of  the  good"  and  of  "the  disutility  involved  in  the 
acquisition  of  the  good,"  with  greater  emphasis  appar- 


208  HISTORICAL    SURVEY 

ently  upon  the  former  (pp.  207-8).  This,  too,  is  a 
search  after  the  standard  of  esteem -value,  without  argu- 
ment as  to  why  such  a  standard,  rather  than  the  stand- 
ard of  any  other  kind  of  value,  alone  deserves  to  appro- 
priate the  title  of  "the  standard  of  value." 

§2.  The  next  adoption  of  the  intermediate  position 
was  by  H.  J.  Davenport  in  his  Outlines  of  Economic 
Theory,  New  York,  1896.  Although  in  one  passage  of 
this  work  Mr.  Davenport  seems  to  look  upon  stability  of 
money  in  exchange -value  as  the  proper  thing,  and 
although  he  avows  this  position  alone  in  a  later  work 
intended  for  students,""^  yet  his  ultimate  theory  is  dif- 
ferent^ He  recognizes  that  "labor  has  value  only  in  the 
sense  that  the  value  of  the  product  may  be  conceived  as 
reflected  back  upon  the  means  by  which  it  is  obtained," 
because  "nobody  wants  labor  as  such,"  and  "ultimately 
the  employers  purchase  not  labor  but  the  goods  which 
labor  affords,"  so  that  "only  for  product,  and  in  propor- 
tion to  product,  can  labor  command  a  price;"  wherefore 
"it  is  not  logical  to  measure  the  value  of  the  product  by 
the  value  of  the  instrument  of  production"  (pp.  52, 
53).  He  thus  rejects  the  labor  standard;  but  he  does 
not  therefore  adopt  the  commodit}^  standard.  In  the  so- 
called  multiple  standard  he  wants  all  services  to  be  in- 
cluded that  are  not  already  indirectly  included  (p.  227). 
This,  however,  is  not  inconsistent  with  the  commodity 

*In  the  earlier  and  principal  work  he  once  says  that  money  should 
not  fall  in  purchasing  power,  because  it  is  a  note  of  demand  payable  by 
society  in  market  products,  p.  233.  This  is  repeated  in  the  later  work, 
the  Outlines  of  elementary  economics,  New  York,  1897,  p.  140.  Here  he 
uses  "value"  only  in  the  sense  of  exchange-value,  p.  6,  cf.  pp.  64,  149; 
and  says:  "An  ideal  money  would  be  a  money  that  did  not  fluctuate  in 
purchasing  power,  "  p.  144;  "A  supply  [of  money]  sufficient  in  kind  and 
quantity  to  preserve  unchanged  the  purchasing  power  of  the  dollar 
would  be  the  ideal  condition  for  all  ordinary  cases, "  p.  150. 


MEDIATORS  209 

standard  proper.  He  rejects  the  commodity  standard  in 
consequence  of  an  analysis  of  contracts,  although  the 
eonsequentialness  is  not  apparent.  "It  was  usefulness," 
he  says,  "and  not  effort,  which  the  debtor  borrowed;  it 
was_the  product  of  effort,  and  not  effort,  which  the 
creditor  loaned.  It  is^jthen,^  in  terras  of  usefulness  that 
payment  should  be  made"  (p.  228).  But  like  Professor 
Ross  and  Mr.  Farquhar  he  seems  to  think  that  the 
standard  of  commodities  is  not  the  same  as  the  standard 
of  usefulness,  admitting  into  this  some  idea  of  esteem- 
value  or  final  utility.  For  he  concludes  that  when  there 
has  been  progress  repayment  should  be  in  more  than  an 
equivalent  command  over  commodities,  in  order  to  agree 
with  the  "higher  standard  of  life," — "somewhere  above 
equality  in  purchasing  power,  somewhere  below  equality 
in  command  over  human  effort"  (p.  229). 

More  definiteness  is  provided  by  Leonard  Darwin  in 
his  work  on  Bimetallism,  London,  1898.  Major  Darwin 
has  only  one  conception  of  "value,"  namely  as  exchange- 
value,*  but  he  has  two  standards  for  deferred  payment. 
He  contrasts  the  "labor  standard"  and  the  "commodity 
standard."  The  labor  standard  exists  when  money  is 
such  that  prices  fall  in  proportion  to  increase  of  output 
per  hour,  so  that  the  money -value  of  the  total  output  of 
a  given  time  of  labor  is  constant.!     Under  this  standard 

•Value  is  value  in  exchange,  p.  6n,  or  power  of  purchasing  other 
commodities,  p.  166,  and  varies  inversely  as  average  prices,  p.  168;  "ap- 
preciation of  gold  is  a  general  fall  in  prices,"  p.  178,  similarly  p.  204. 
When  a  monometallist  speaks  of  the  fall  of  prices  as  having  "something, 
though  it  cannot  have  much,  to  do  with  the  value  of  gold,  we  can  see 
that  either  he  is  talking  absolute  nonsense,  or  else  that  he  is  giving  some 
unknown  meaning  to  his  words,"  p.  168,  cf.  pp.  177-8. 

tThis  is  definitely  the  cost  standard,  and  in  a  note  he  contrasts  it 
with  the  "wages  standard,"  in  which  wages  are  on  the  average  constant. 
But  even  under  the  labor  standard  he  generally  implies  that  wages  are 

N 


210  HISTORICAL    SURVEY 

wage -earners  and  salaried  officials  automatically  receive 
their  share  of  the  increase  of  the  coniraodit}- output  and 
the  progress  of  material  civilization.  The  commodity 
standard  exists  when  money  is  such  that  average  prices 
are  constant,  wherefore  with  increased  output  the 
money -value  of  the  whole  will  rise.  Wage -earners  and 
others  can  get  their  share  of  the  increase  only  by  a  raise 
in  their  wages  or  salaries  (pp.  239-41).  Comparing 
these,  he  thinks  that  from  the  standpoint  merely  of  dis- 
tribution the  former  seems  to  be  the  better,  as  doing 
a_way  with  the  need  of  adjustment  of  wages  and  sal- 
aries; but^it  has  the  demerit  of  letting  idle  receivers  of 
fixed  incomes  share  the  benefits  of  progress  due  solely 
to  the  exertions  of  others.  But  with  reference  to  pro- 
duction he  thinks  the  latter  the  better,  as  the  former  is 
a  drag  upon  industry,  while  the  latter  is  stimulative 
(pp.  241-2).  He  now  sa3'S  "a  compromise  naturally 
suggests  itself;  that  is  to  say,  a  standard  occupying  an 
intermediate  position  between  the  labor  standard  and 
the  commodity  standard  would  appear  on  the  whole  to 
be  the  best"  (p.  242).  This,  of  course,  is  necessary 
only  "when  trade  is  progressing;"  for  when  trade  is 
stagnant,  prices  ought  to  be  constant  (pp.  256-7),  since 
in  a  stationary  period  the  two  standards  coincide.  The 
idea  here  conveyed  is  that  the  proper  standard  should  be 
halfway  between  the  other  two, —  that  the  movement  of 
prices  should  be  such  that  the  money -value  of  the  total 
output  should  rise  at  about  the  same  rate  as  the  average 
price  of  the  products  falls.  But  if  this  ideal  is  not  ob- 
tainable. Major  Darwin  has  clear  ideas  about  the  next 
best  thing.     While  the  two  standards  are  the  limits  be- 

constant,  or  rather  earnings  in  general.  This  is  true  only  if  labor 
continues  to  be  applied  during  the  same  number  of  hours  per  day. 


MEDIATORS  211 

yond  which  the  price -movement  ought  certainly  not  to 
go  (pp.  244,  330),  be  thinks  that  if  there  is  deviation 
from  the  midway  position,  this  ought  to  be  rather  in  the 
direction  of  the  commodity  standard  than  in  that  of  the 
labor  standard,  that  is,  in  a  period  of  progress,  prices 
ought  to  fall  too  little  rather  than  too  much,  it  is  better 
that  the  money-value  of  the  total  output  should  rise  more 
than  the  average  price  of  the  products  falls.  The  reason 
for  this  is  that  he  attaches  more  importance  to  the  ad- 
vantages and  disadvantages  to  industry  than  to  the 
advantages  and  disadvantages  in  distribution.  Too 
great  a  fall  of  prices  is  a  hindrance  to  the  producer,  and 
overmuch  favors  the  idler.  Too  small  a  fall  of  prices 
encourages  more  the  producer  than  the  idler  (pp.  245-6, 
250,  257,  265,  276).  Applying  the  same  idea  to  the 
stationary  period,  he  judges  that  if  constancy  of  prices 
cannot  be  obtained,  it  is  better  for  prices  to  rise  than 
for  them  to  fall  (p.  257).  The  reasoning  might  be  re- 
versed, to  the  effect  that  just  as  it  is  better  in  the 
stationary  period  for  prices  to  rise  rather  than  to  fall,  so 
in  the  progressive  period  it  is  better  for  them  to  remain 
above  the  mean  between  the  two  standards  than  to  sink 
below  it.  The  application  of  these  principles  to  the 
bimetallic  question  is  that  as  gold  seems  to  have  behaved 
in  accordance  with  the  labor  standard  and  silver  in  ac- 
cordance with  the  commodity  standard,  bimetallism 
would  have  occupied  the  correct  intermediary  position, 
or  if  it  had  erred  at  all,  would  have  erred  on  the  side  of 
not  keeping  up  the  level  of  prices  sufficiently  (pp.  276, 
330-1),  soijhat,  although  not  so  good  as  it  ought  to  be, 
it  would  still  not  have  been  so  bad  as  the  single  gold 
standard.  The  argument  differs  from  that  usually  em- 
ployed by  the  bimetallists;   but  agrees  in  assigning  more 


212  HISTORICAL    SURVEY 

importance  to  the  commodity  standard  than  is  allowed 
to  it  by  the  monoraetallists. 

Lastly,  a  similar  position,  on  a  different  line  of 
thought,  has  been  advanced  by  T.  S^  Adams  in  an 
article  on  Index  Numbers  and  the  Standard  of  Value,  in 
the  Journal  of  Political  Economy,  Chicago,  December 
1901,  Dr.  Adam's  conception  is  that,  on  the  one  hand, 
the  commodity  standard,  treated  under  the  designation 
of  "consumption  standard,"  is  "whollj'  one-sided," 
being  "fairly  equitable"  from  the  standpoint  of  the 
consumer  or  creditor,  but  failing  from  the  standpoint 
of  the  debtor  or  producer,  except  when  prices  and 
wages  happen  to  vary  together,  the  idea  being  the 
strange  one  that  the  debtor  ought  to  pay  according  to 
his  "relative  ability"  at  the  two  periods  of  making  and 
settling  the  loan,  and  the  mistaken  one  that  this  is  to 
the  interest  of  the  debtor  and  producer  and  that  it  is  to 
the  interest  of  the  creditor  and  consumer  to  receive  in 
repayment  merely  the  amount  of  commodity  loaned, 
(pp.  11-12),  although  such  would  be  the  case  only  in  a 
period  of  degeneration  and  industrial  decay.  On  the 
other  hand,  he  conceives  of  the  labor  standard,  or  "pro- 
duction standard,"  as  equally  one-sided,  treating  it  as 
if  it  were  in  the  interest  of  the  debtor  or  producer 
(pp.  17-18),  although,  as  before,  this  would  be  so 
only  in  a  retrogressive  period,  since  in  a  period  of 
progress  it  would  be  like  saying  that  it  is  to  the  in- 
terest of  the  debtor  and  producer  to  repay  more  com- 
modity than  he  borrowed.  For  such  a  period  of  prog- 
ress, with  which  alone  the  world  has  been  interested  for 
many  centuries  and  with  which  we  are  still  chiefly  con- 
cerned, ho  has  curiously  mixed  the  respective  merits  and 
demerits  of  the  two  standards  and  their  relations  to  the 


MEDIATORS  213 

opposing  classes  of  debtors  and  creditors.*  Be  this  as 
it  may,  he  concludes  by  following  Professor  Bohm- 
Bawerk  in  demanding  that  "the  ultimate  standard  of 
value,  and  d,  fortiori  the  ultimate  standard  of  deferred 
payments,  must  sum  up  in  itself  the  merits  of  both  the 
consumption  and  the  labor  standards.  It  must  rest 
secure  upon  its  own  foundation,  but  it  must  effect,  at 
the  same  time,  a  rational  compromise  between  the  two 
others"  (p.  18),  and  again  in  affirming  that  "there  is  a 
practical  as  well  as  a  strong  theoretical  and  historical 
necessity  for  some  standard  of  deferred  payments  logi- 
cally intermediate  between  the  consumption  and  labor 
standards"  (p.  31).t  There  is  likewise  failure  here  to 
perceive  that  what  is  called  the  "ultimate  standard  of 
value  "  can  only  be  a  standard  of  one  kind  of  value,  and 
in  no  wise  bears  with  it  the  d.  fortiori  presumption  that 
it  is  the  proper  standard  for  deferred  payments  rather 
than  an  ultimate  standard  of  another  kind  of  value. 

§3.  The  intermediate  standard  recommended  by 
these  authors  could  be  realized  in  either  of  two  ways. 
It  could  be  realized  b}^  working  out  the  index -number 
for  prices  and  again  the  index -number  for  wages  or 
earnings,  and  then  drawing  a  mean  between  them, 
assigning  equal  importance  or  weight  to  each;!  or  by 
putting  all  in  the  same  list,  taking  care  to  give  as  much 


*To  say  that  in  the  present  state  of  the  world  the  labor  or  production 
standard  is  in  the  interest  of  the  idle  consumer,  and  the  commodity  or 
consumption  standard  is  in  the  interest  of  the  producer,  may  at  first 
sight  seem  paradoxical;  but  it  takes  little  analysis  to  see  that  such  is 
the  case. 

t  In  the  continuation  of  this  paper  in  the  issue  of  the  same  Journal 
for  March  1902,  his  standard  depends  upon  both  prices  and  incomes  or 
wages,  pp.  204,  212-213. 

tQuery:  should  the  mean  be  the  arithmetic,  harmonic,  or  geometric? 
If  they  are  treated  as  equally  important,  it  should  be  the  geometric. 


214  HISTORICAL    SURVEY 

"weight  to  all  the  wages  or  earnings  together  as  to  all 
the  prices  together,*  and  drawing  the  average  in  the 
nsual  way,  so  far  as  applicable  to  wages  and  earnings. 
As  already  remarked,  the  method  of  averaging  wages  or 
earnings  has  never  yet  been  properly  developed.  In  the 
lasl  article  above  noticed.  Dr.  Adams  has  formulated 
some  methods  (p.  15), t  and  has  noticed  that  the  ques- 
tions involved  are  as  difficult  as  in  the  measurement  of 
prices  (p.  16).  But,  like  the  rest,  he  dismisses  the 
subject  by  attaching  little  importance  to  weighting  (pp. 
16-17).  If  this  standard,  or  if  the  wages  standard  or 
earnings  standard  alone,  is  to  be  adopted,  its  advocates 
ought  to  pay  attention  to  this  question  of  method. 


*This  requirement  is  on  the  assumption  that  an  exactly  midway 
position  is  desired.  If  a  result  is  desired  more  closely  following  the  ona 
or  the  other  standard,  greater  weight  must  accordingly  be  attached  either 
to  the  commodities  or  to  the  wages. 

tin  some  of  his  formiilae  he  has  made  the  oversight  of  not  perceiv- 
ing that  in  determining  the  variation  of  the  value  of  money  by  arith- 
metically averaging  inverse  variations  of  wages  (and  previously  of 
prices),  he  is  not  doing  what  is  usually  done  when  the  direct  variations 
of  wages  (or  of  prices)  are  arithmetically  averaged,  since  his  procedure 
agrees  only  with  the  employment  in  the  latter  process  of  the  harmonic 
average. 


PART  III.    SYSTEMATIC  REVIEW 


CHAPTER  I 

NEED  OF  CARE  IN  INTERPRETING  THE  STATEMENTS 
OF  ECONOMISTS 

§1.  A  casual  perusal  of  the  works  of  the  foremost 
political  economists  might  give  one  the  impression  that 
they  all  used  the  term  "value"  in  the  sense  of  exchange- 
value,  so  that  there  would  appear  to  be  no  further 
question  on  the  subject.  For  the  direct  statement  that 
political  economy  is  concerned  only  with,  and  treats 
only  of,  value  in  exchange,  or  exchangeable  value,  or 
exchange -value,  has  been  made  by  the  following  econo- 
mists, among  others,  after  first  being  implied  by  Adam 
Smith  and  Ricardo:  — 

J.  B.  Sat,  Cours,  p.  33b ;  McCulloch,  Note  to  Wealth  of 
Nations,  p.  438b;  Scrope,  p.  164;  Malthus,  Principles,  2d  ed.  p. 
50;  Raymond,  3d  ed.  Vol.  I.  p.  57,  cf.  pp.  60,  78,  and  1st  ed. 
pp.  70,  77;  J.  Garnier,  §373;  J.  S.  Mill,  Vol.  I.  p.  538,  Vol.  II. 
p.  12;  BowEN,  Political  economy,  p.  33;  Macleod,  Elements,  p. 
52,  TJteory  of  hacking,  Yo\.  I.  p.  65;  Fawcett,  p.  347;  A.Walker, 
p.  9;  G.  Fauveau,  Considerations  mathematiqucs  sitr  la  thiorie  de  la 
valenr.  Journal  des  Economistes,  Jan.  1867,  p.  31;  Jevons,  In- 
vestigations, p.  251,  cf.  Money,  etc.,  pp.  11,  15,  68;  N.  A.  Nichol- 
son, The  science  of  exchanges,  London,  1873,  p.  1;  J.  E.  Cairnes, 
Some  leading  principles  of  political  economy,  London,  1874,  p.  11, 
cf.  p.  12;*  Madrazo,  Vol.  I.  p.  108;  E.  Fauconnier,  Vargent  et 


•Caimes  has  not  interested  us  in  the  preceding  Part  because  he  is 
(215) 


216  SYSTEMATIC    REVIEW 

I'or,  Paris,  1881,  p.  52;  Perry,  Introduction,  p.  31 ;  F.  A.  Walker, 
Political  economy,  p.  82;  J.  S.  Nicholson,  Treatise,  p.  45;  Mar- 
shall, Economics  of  industry,  p.  68,  Principles,  Vol.  I.  p.  8;  H. 
George,  Science  of  political  economy.  New  York,  1898,  p.  249; 
Darwin,  p.  6n. 

But  no  definite  inference  can  be  drawn  from  such 
mere  statements,  on  account  of  the  different  meanings 
attached  to  the  term  " exchange- value  "  itself,  and  its 
variants  (with  or  without  the  epithet  "real")-  This 
term  we  have  seen  used  in  all  the  economic  senses  of  the 
term  "value"  except  that  of  use-value,  and  even  in  a 
mixture  of  exchange -value  proper  and  esteem -value. 
In  fact,  in  this  list  of  twenty -three  writers  only  six  or 
seven  have  confined  themselves  to  the  meaning  of  ex- 
change-value proper. 

Then  many  economists  have  defined  "value"  in 
general  in  a  way  which  specifies  only  exchange -value, 
or  at  most  exchange -value  conceived  to  be  in  commodi- 
ties and  services  or  labor.  Among  these  attentiom  may 
be  drawn  to  the  definitions  given  by  the  following 
economists:  — 

Vasco,  Vol.  I.  pp.  7,  8;  Ricardo,  p.  9;  J.  B.  Say,  Traits, 
Vol.  II.  p.  156;  J.  Mill,  p.  102;  Scrope,  p.  167n;  Senior,  pp.  7, 
14,  96;  Bowen,  op.  eit.  p.  292  (of  "real  value  or  price");  Faw- 
CETT,  pp.  311-12;  A.  Walker,  pp.  8,  175;  Jevons,  Theory,  p. 
82,  Primer,  p.  98;  Sidgwick,  pp.  248,  260,  cf.  p.  59;  J.  S.  Nich- 
olson, p.  63;  Laughlin,  Facts  about  money,  p.  75;  Davenport, 
Elementary  economics,  p.  6;  Farrer,  p.  90. 

Out  of  these  fifteen  all  but  four  or  five  have  departed 
from  their  own  definitions,  and  have  used  the  term  as  if 
it  referred  to  exchange -value  in  labor  alone  or  even  to 

one  of  the  rare  economists  who  look  upon  variations  in  the  value  of 
money,  if  world-wide,  as  of  no  consequence,  pp.  407,  412. 


NEED    OF    CARE  217 

something  else  entirely  different  from  exchange -value  in 
any  possible  sense,  namely  to  cost  of  production.  This 
may  occasion  less  surprise  when  we  remember  having 
seen  such  leaders  as  Adam  Smith  and  Malthus,  not  to 
mention  Ricardo  himself,  and  others,  make  the  same 
deviations  even  in  regard  to  the  specific  term  "ex- 
change-value" (or  one  of  its  variants).  Only  those 
economists  already  mentioned  whose  opinions  have  been 
summarized  in  Part  II.  Chapter  VII.  and  some  of  the 
early  ones  reviewed  in  the  first  Chapter  of  that  Part, 
have  consistently  kept  to  their  own  definitions. 

The  same  fault  may  be  found  with  many  who  have 
used  the  term  "value,"  especially  in  connection  with 
money,  in  the  sense  of  purchasing  power.  Even  if  it 
be  allowed  to  stretch  this  definition  from  purchasing 
power  over  commodities  to  purchasing  power  over  labor, 
it  certainly  cannot  by  any  conceivable  propriety  of  lan- 
guage be  confined  to  purchasing  power  over  labor  alone. 
Yet  we  have  seen  Adam  Smith  do  this  at  least  of  "real 
value"  or  "real  exchangeable  value,"  and,  by  omission  of 
the  epithet,  of  "value"  or  "exchangeable  value"  simply, 
and  we  have  seen  him  followed  by  others.  Likewise 
we  have  seen  Ricardo,  and  many  others,  though  using 
this  definition  of  "the  value  of  money,"  also  use  the 
phrase  in  an  entirely  different  sense,  applied  to  "real 
value"  or  to  "value"  simply,  of  cost  of  production,  or 
cost -value.  "Purchasing  power"  we  have  seen  to  be 
expressly  turned  to  mean  something  entirely  different 
from  what  the  term  purports,  by  Malthus.  Others  who 
have  identified  "value"  with  purchasing  power  are:  — 

SCROPE,  pp.  164-5;  J.  Garnier,  ^gl3,  412,  432;  J.  S.  Mill, 
Vol.  I.  pp.  538,  565,  588,  Vol.  II.  p.  11;  Stirling,  p.  45n : 
MACLEOD,  Theory  of  hanking,  Vol.  I.  p.  15,  Theory  of  credit,  p.  509; 


218  SYSTEMATIC    REVIEW 

Jevons,  Investigations,  p.  20;  Fawcett,  pp.  462,  509;  Mann,  p, 
8,  156;  Cairnes  (value  only  another  name  for  purchasing  power), 
op.  cit.  p.  13;  F,  A.  Walker,  Money,  trade,  etc.,  p.  36,  Political 
economy,  pp.  5,  81,  84-5;  Perry,  pp.  26-7,  29,  38-9;  Jourdan, 
p.  426;  SiDGWicK,  p.  248;  J.  S.  Nicholson,  pp.  30-1;  Laughlin, 
op.  cit.  p.  147:  H.  White,  p.  28  (confined  to  unmonopolized  com- 
modities) ;  Darwin,  p.  166. 

Among  these  seventeen  onl}^  six  have  rigorously  held 
to  the  meaning  belonging  to  the  term. 

Therefore  we  must  be  on  our  guard  against  interpret- 
ing economists  by  an  appeal  to  a  few  plain  statements. 
However  plain  and  clear  some  few  of  their  statements 
may  be,  according  to  the  ordinary  use  of  language,  their 
meaning  may  be  different,  or  they  may  not  abide  by  the 
meaning  they  had  in  mind  "when  they  made  these  state- 
ments. 

§2.  Perhaps,  however,  the  greatest  departure  from 
the  clear  meaning  of  words  is  made  in  still  another 
statement.  It  is  evident  that  to  say  the  "value"  of 
monej'  is  measured  or  estimated  by,  and  varies  inversely 
with,  the  general  level  of  prices,  or  that  a  general  fall  of 
prices  is,  or  constitutes,  appreciation  of  money,  and 
similarly  of  a  rise  and  of  depreciation,  and  the  like,  can, 
rightly  refer  only  to  the  exchange -value  of  money,  in  its 
proper  sense  with  reference  to  commodities  alone,  or  at 
most  with  extension  to  include  the  so-called  price,  or 
wages,  of  labor.  Now  this  statement,  merely  varying 
in  the  different  combinations  of  words  of  which  it  is 
susceptible,  is  of  the  commonest  recurrence  in  the  writ- 
ings of  economists,  and  may  be  found  in  the  follow- 
ing:— 

Montanari,  pp.  90-91  ;  Locke,  p.  30  (as  an  opinion  of 
others);  Law,  p.  116;  Galiani,  Vol.  I.  p.  155;  Genovesi,  Vol. 
IV.  p.  207;  Verri,  Vol.  I.  p.  34;  A.  Hamilton,  in  letter  to  Robert 


NEED    OF    CARE  219 

Morris,  1780,  Works,  Lodge's  ed.  Vol.  III.  p.  63  (of  "relative 
value");  Solera,  p.  292,  cf.  p.  295;  Ricardo,  pp.  214,  377; 
Craufurd,  p.  160;  G.  Garnier,  Note  to  Adam  Smith,  Vol.  V.  p. 
431;  Ganilh,  p.  265  (but  confines  it  to  the  ease  only  of  all  prices 
varying,  p.  266,  relying  on  Vasco,  Vol.  I.  p.  10);  D.  Stewart, 
Vol.  1.  p.  436;  ToRRENS,  Essay  on  the  production  of  iDealth,  pp. 
44,  166,  Principles  and  practice  of  Sir  R.  PeeVs  Bill,  pp.  64,  86, 
87;  J.  P.  Smith,  pp.  76,  79;  Raymond,  1st  ed.  p.  424  (3d  ed. 
Vol.  II.  p.  353);  J.  Graham,  Corn  and  currency,  London,  1826,  p. 
24;  J.  B.  Say,  Cours,  p.  180;  Gouge,  op.  cit.  Part  I.  p.  10a; 
Scrope,  p.  215;  Bailey,  Money  and  its  vicissitudes,  pp.  46-7; 
Alison,  p.  39;  J.  S,  Mill,  Vol.  L  p.  541,  Vol.  II.  pp.  11,  15,  301, 
cf.  p.  86;  J.  Garnier,  U  410,  440;  Stirling,  p.  61;  W.  Lipke, 
op.  cit.  p.  333;  Roscher,  p.  256  (of  exchange-value);  Bowen,  op. 
cit.  pp.  298,  410;  Macleod,  Elements,  p.  83,  Theory  of  hanking, 
Vol.  I.  p.  43,  Theory  of  credit,  p.  113,  cf.  p.  859  (includes  rate  of 
discount) ;  Levasseur,  i'or  et  V argent,  p.  138;  Chevalier,  Baisse 
probable,  etc.,  p.  123;  J.  Prince-Smith,  Der  Markt,  in  Werke, 
Vol.  I.  p.  17;  Jevons,  Investigations,  pp.  20-1,  53-4;  Fawcett, 
pp.  367,  371,  372,  409,  434,  460;  B.  Price,  Principles  of  currency, 
p.  48;  Currency  and  banking,  p.  21;  Drobisch,  Ueber  Mittelgrossen, 
etc.,  in  Berichte  der  Gesellschaft  der  Wissenschaften  zu  Leipzig, 
1871,  p.  39,  Ueber  die  Berechnung,  etc.,  in  Jahrbiicher  fiir  Nat.- 
oekon.  und  Statistik,  1871,  pp.  148-9;  Ma^n,  pp.  8,  62,  156,  166, 
175-6;  H.  R.  Linderman,  Report  of  the  Director  of  the  Mint, 
Washington,  1873,  p.  21;  Giffen,  Essays,  1st  Series,  pp.  83,  200, 
M  Series,  p.  103,  Case  against  bimetallism,  p.  219;  Knies,  p.  189 
(of  exchange-value);  Cairnes,  op.  cit.  p.  155;  A.  Wagner,  Fiir 
bimetallistische  Munzpolitik  Deiitschlnnds,  Berlin,  1881,  p.  101;  H. 
Kleser,  Die  deutsche  Wdhrung  %(nd  ihre  Gegner,  Koln,  1883,  pp. 
.28-9  (but  opposes  the  fall  of  the  rate  of  discount  to  show  that  gold 
has  depreciated,  pp.  30-1);  De  Foville,  quoted  by  Martello,  La 
moneta,  etc.,  Florence,  1883,  p.  84n;  L.  Hansard,  On  the  prices 
of  some  commodities  during  the  decade  1874-83,  Journal  of  the 
Bankers'  Institute,  London,  Jan.  1885,  p.  42;  J.  Lehr,  Beitrdge 
sur  Statistik  der  Preise,  Frankfiirt  a.  M.,  1885,  p.  40;  Laughlin, 
History  of  bimetallism,  pp.  x.  64-5,  Elements,  pp.  64-5;  Newcomb, 
Principles,  p.  213  (of  "absolute  value") ;  A.  Mongredien,  On  the 
displacement  of  labor  and  capital,  London,  1886,  p.  31;  H.  Hoare, 
The  appreciation  of  gold  and  its  cotmexion  with    the  depression  of 


220  SYSTEMATIC    REVIEW 

trade,  London,  1886,  p.  14;  O.  Arendt,  Der  Wdhrungsstreit  in 
Deutschland, 'BerVm,  1886,  p.  44;  Horton,  The  silver  pound,  p.  5n; 
H.  B.  Greven,  in  Consular  Reports  No.  87,  Washington,  1887,  p. 
411 ;  J.  S.  Nicholson,  pp.  45-6,  61-2  (and  in  Evidence  before  the 
Gold  and  Silver  Commission,  First  Report,  1887,  q.  4035);  D. 
Watney,  Evidence  before  the  Gold  and  Silver  Commission,  Second 
Report,  1888,  qq.  9372-3:  Denslow,  p.  343;  Farrer,  pp.  51,  60 
(but  cf.  p.  297);  D.  A.  Wells,  Recent  economic  changes.  New' 
York,  1889,  p.  207n;  Marshall,  Principles,  Vol.  I.  p.  432n;  H. 
Grittner,  Goldwdhrung  ist  Erwerhsnoth,  Berlin,  1890,  p.  20; 
E.  DE  Laveleye,  La  monnaie  et  le  himetallisme  international,  Paris, 
1891,  p.  9;  Ross,  The  Standard  of  deferred  payments,  p.  38;  F.  W. 
Taussig,  The  silver  situation  in  the  United  States,  New  York,  1893, 
p.  106;  Trenholm,  p.  88;  S.  McC.  Lindsay,  Die  Berechnung  der 
Edelmetalle  seit  1850,  Jena,  1893,  p.  26;  G.  P.  Osborne,  Princi- 
ples of  economics,  Cincinnati,  1893,  pp.  227-9;  H,  voN  Sydow- 
DoBBERPHUL,  Beitrdge  zur  Wdhrungsfrage,  Berlin,  1893,  p.  49;  W. 
Brough,  Tlie  natural  late  of  money,  New  York,  1894,  p.  6,  Open 
mints  and  free  banking,  New  York,  1898,  p.  26;  R.  Weissinger, 
What  is  money?  Louisville,  1895,  pp.  55-6;  Leroy-Beaulieu, 
Vol.  III.  pp.  146,  147,  ef.  p.  220;  Davenport,  Elementary  eco- 
nomics, p.  149,  ef.  Economic  theory,  p.  224;  Hadley,  p.  193; 
Darwin,  pp.  168,  178,  204. 

It  would  be  very  convenient  if  we  could  appeal  to  all 
these  economists  as  agreeing  that  the  "value"  of  money 
is  its  exchange -value.  But  even  in  the  wide  sense  of 
extending  exchange -value  to  cover  exchange-value  in 
labor  as  well  as  in  commodities,  they  do  not  so  agree  in 
substance  as  they  do  in  words.  Apart  from  the  early 
economists  and  the  professed  bimetallists  among  the 
later,  few  of  the  writers  on  general  economics  here  cited 
can  be  confidently  appealed  to  as  maintaining  that  in 
order  to  avoid  appreciation  and  depreciation  and  to  keep 
money  stable  in  "value,"  as  is  by  all  desired,  the  gen- 
eral level  of  prices  ought  to  be  constant.  For  in  mak- 
ing the  above  sort  of  statement  many  have  apparently 


CLASSIFICATION   OF  THE    STANDARDS  221 

had  in  mind  only  some  sudden  clianges  in  general 
prices,  in  short  periods,  in  which  the  "values"  of  com- 
modities in  some  other  sense  of  the  term,  such  as  cost- 
value  or  esteem-value,  have  not  had  time  to  vary- 
sensibly.  They  have  therefore  simply  for  the  moment 
assumed  that  commodities  are  stable  in  "value,"  in 
every  sense,  or  have  taken  such  changes  of  general 
prices  as  more  ^jroftaft??/  indicating  changes  in  the 
"value"  of  money  than  in  the  "values"  of  commodi- 
ties, thereby  still  conceiving  of  "value"  in  one  of  the 
other  senses,  and  not  really  intending  to  assert,  as  a 
universal  proposition,  that  a  fall,  for  instance,  of  the 
average  of  all  prices  necessarily  is,  or  ipso  facto  consti- 
tutes, appreciation  of  money,  by  the  meaning  of  the 
terms;  which  they  would  have  to  do  if  they  meant  to 
refer  to  exchange -value.  Or  some  of  them  have  even 
had  reference  to  exchange -value  on  the  occasion  when 
they  made  this  statement,  applying  in  a  general  way  to 
"value"  what  they  perceived  to  be  universally  true  of 
exchange-value,  but  have  in  other  places  used  the  same 
term  "value"  in  other  senses,  measurable  in  other  waj's. 
Whenever  we  meet  with  this  statement,  then,  we  must 
look  to  see  if  there  is  any  arriere  pensee  in  the  mind  of 
the  assertor. 


CHAPTER   II 

CLASSIFICATION    OF    THE     STANDARDS 

§1.  In  order  to  classify  the  opinions  of  writers  who 
use  terms  so  vaguely  and  inexactly,  it  is  necessary  to 
review  and  summarize  the  possible  positions  that  can  be 
assumed  in  regard  to  the  subject  before  us. 


222  SYSTEMATIC    REVIEW 

Primarily  there  are  three:  —  (1)  Stability  of  the 
exchange -value  or  purchasing  power  of  money,  meas- 
ured by  its  relation  to  commodities  alone,  as  expressed 
in.  the  inverse  of  their  prices,  these  forming  the  com- 
moditij  standard,  or  prices  standard.  (2)  Stability  of 
esteem-value,  often  stated  as  stability  of  "real  exchange- 
value,"  confined  to  exchange -value  in,  or  purchasing 
power  over,  labor  alone,  as  expressed  in  its  so-called 
"price,"  or  wages  (extended  to  salaries  and  profits  —  to 
all  earnings,  as  it  should  be,  and  even  to  all  incomes 
in  general),  forming  the  tvages  standard,  or  better  the 
earnings  standard,  or  the  income  standard.  (3)  Sta- 
bility of  cost- value  (often  expressed  under  the  term 
"real  value,"  and  even  under  the  wholly  misapplied 
term  of  "real  exchange-value"),  meaning  that  the 
money  metal  should  always  be  produced  with  the  same 
effort  and  that  the  prices  of  commodities  should  con- 
form to,  and  mark,  their  labor-costs,  in  accordance  with 
what  may  be  called  the  cost  standard. 

These  are  the  simple  elements.  In  addition,  (4) 
people  have  combined  the  first  and  the  second,  com- 
pounding a  mixture  of  the  two,  the  terms  "exchange- 
value"  and  "purchasing  power"  being  used  of  exchange- 
value  in,  and  purchasing  powder  over,  both  commodities 
and  labor,  wherefore  this  should  be  called  the  com- 
modity -and- wages  standard,  or  better  the  prices-and- 
earniugs  standard.  Agreeing  with  it,  money  would  be 
stable  in  no  one  kind  of  value,  but  w'ould  be  at  a  mean 
between  variation  in  exchange -value  and  variation  in 
esteem -value.  Again,  (5)  people  have  confusedly  held 
at  once  the  second  and  the  third  positions.  These 
positions  do  not  admit  of  being  combined  into  a  wages- 
and-cost  standard.     They  have  rather  been  treated  indif- 


CLASSIFICATION   OF   THE    STANDARDS  223 

ferently  as  if  they  were  the  same,  the  distinction  between 
them  not  being  observed.  This  hybrid  admits  only  of 
being  designated  as  a  vague  lahor  standard,  the  standard 
for  the  confused  idea  of  labor-value.  And  lastly,  (G) 
when  the  standard  combined  with  the  first  is  this  con- 
fused mixture  of  the  second  and  third,  then  instead 
of  the  eommodity-and-wages  standard  we  have,  less 
definitely,  the  commodity- and -lalor  standard. 

§2.  The  first  of  these  positions  would  seem  to  be 
entertained  by  those  who  recommend  the  so-called 
"tabular"  or  "multiple  standard."  Such  are  persons 
who  wish  to  make  a  practical  use  of  index  numbers 
determined  on  lists  which,  so  far  as  actually  carried 
out,  have  usually  been  confined  to  the  prices  of  com- 
modities. Their  recommendations  have  generally  been 
in  one  of  two  forms:  either  that  contracts  should  be 
settled  in  suras  varying  directly  with  the  index  figures, 
with  aim  to  correct  the  imperfection  of  money  as  a 
standard;  or_that  money  itself  should  be  so  regulated 
as  to  maintain  the  index  figure  nearly  invariable,  with 
aim  to  keep  money  perfect  so  far  as  possible  as  a 
standard.     Those  who  have  advanced  the  former  are  — 

Lowe  and  Scrope,  as  already  described  (the  latter  being  followed 
by  R.  H.  Walsh,  and  reviewed  by  J.  Maclaren);  Mann,  p.  180 
(in  adjusting  debts  upon  return  to  specie  payments) ;  Jevons, 
Money,  etc.,  pp.  328-33;  Horton,  Silver  and  gold,  2d  ed.  pp. 
36-43  (refers  to  K.  Walcker,  Die  Silbercntwcrthungsfrage,  Stras- 
burg,  1877,  as  recommending  it  especially  for  state  debts'); 
F.  A.  Walker  (confining  it  to  persons  not  in  business),  Money, 
pp.  161-3,  Money,  trade  and  industry,  pp.  70-7;  Marshall  (re- 
servedly), in  Report  of  the  Industrial  Remuneration  Conference, 
London,  1885,  pp.  185-6,  Remedies  for  fluctuations  of  prices,  pp. 
363-5;  Newcomb,  Principles,  p.  214  (he  was  less  favorable  to  it  in 
The  standard  of  value,  p.  234,  because  of  its  unsuitability  for  short 


224  SYSTEMATIC    REVIEW 

debts);  J.  S.  Nicholson,  Treatise,  pp.  31-4,  37;  T.  Laves,  Die 
"  Waarenwdhrung  "  als  Ergdnzung  der  Edelmetalivdhrung ,  Schmollera 
Jahrbuch  fiir  Gesetzgebung,  etc.,  Leipzig,  1890,  pp.  837-46. 

The  scheme  is  also  entertained  by  Laughlin,  History,  pp.  xi- 
xii  (to  head  off  bimetallism),  Elements,  pp.  76-7;  by  Giffen, 
Recent  changes  in  prices  and  incomes  compared,  Journal  of  the 
Statistical  Society,  London,  1888,  pp.  54-5;  and  by  Leroy-Beau- 
LiEU,  Vol.  in.  pp.  120,  345-9.  It  was  countenanced  by  Zucker- 
KANDL  before  his  change  of  view,  as  already  recorded.  It  is 
recommended  as  a  substitute,  in  case  of  failure  to  establish  the 
other  scheme,  by  Winn  and  Parsons  (see  the  next  list). 

The  latter  has  been  recommended,  mostly  in  con- 
nection with  inconvertible  paper  money,  but  also  in 
connection  with  paper  money  redeemable  in  variable 
amounts  of  precious  metal,  by  the  following:  — 

Suggestively  by  R.  Walsh,  pp.  275-7;  Scrope,  pp.  418-19; 
W.  Cross,  Standard  pound  versus  pound  sterling,  1856  (?);  Jevons, 
Money,  etc.,  pp.  327-8  (with  redemption  in  goods);  Newcomb,  The 
standard,  etc.,  pp.  235-7;  J.  Conrad,  in  Wissenschaftliclie  Guiachien 
ilher  die  Wdhrungsfrage,  Berlin,  1893,  pp.  33-4;  A.  de  Molinari, 
Precis  d' economic  politique,  Paris,  1893,  p.  67;  Osborne,  op.  cit. 
p.  332.  More  seriously  advocated  by  J.  Barr  Robertson  before 
the  Gold  and  Silver  Commission,  Second  Report,  1888,  qq.  6294- 
6304;  A.  Williams,  A  ^ fixed  value  of  bidlion'  standard.  Economic 
Journal,  June  1892,  pp.  280-9;  O.  J.  Frost,  The  question  of  a 
standard  of  value,  Denver,  1894,  p.  26;  A.  L.  Fonda,  Honest  money. 
New  York,  1895,  pp.  158-95;  H.  Winn,  The  multiple  standard, 
American  Magazine  of  Civics,  Dec.  1895,  pp.  579-89;  J.  A.  Smith, 
pp.  33-42;  T.  N.  Whitelaw,  A  contribution  to  the  study  of  a  con- 
stant standard  and  just  measure  of  value,  Glasgow,  1896,  pp.  20-2, 
28-82;  F.  Parsons,  Rational  money,  Philadelphia,  1898,  pp.  102ff. ; 
T,  E.  Will,  Stable  money.  Journal  of  Political  Economy,  Chicago, 
Dec.  1898,  pp.  85-92. 

The  same  has  also  been  recommended  in  connection 
with  metallic  money,  in  "limping  bimetallism"  or 
"humpback  monometallism,"  by  means  of  regulating 
the  issue  of  silver  coins,  by  these:  — 


CLASSIFICATION   OF  THE    STANDARDS  225 

Sug{2:cstivcly  by  T.  Mannequin,  La  monnaie  et  le  double  etalon, 
Paris,  1874,  p.  59,  and  M.  Lkon,  Comment  la  legislation  peut  influer 
sur  la  valeur  de  la  monnaie,  Journal  des  Eeonomistes,  Sept.  1876, 
pp.  377-9;  and  emphatically  by  L.  Walras  in  the  same  Journal, 
Dec.  1876,  May  1881,  Oct.  1882,  and  in  his  principal  works,  who 
has  been  followed  by  E.  B.  Andrews,  An  honest  dollar,  Publica- 
tion of  the  American  Economic  Association,  Nov.  1889,  pp.  36-46, 
and  Institutes  of  economics,  Boston,  1891,  p.  141.* 

An  approximation  to  this  object,  supposed  to  be 
closer  than  under  monometallism,  is  one  of  the  objects 
sought  by  the  bimetallists.  As  showing  that  the  object 
desired  is  stability  in  exchange -value,  or  purchasing 
power,  rather  than  in  any  other  kind  of  value,  only  a 
few  more  examples  need  here  be  noticed,  additional  to 
those  already  cited  in  Part  II.  Chapter  VII.  §6:  — 

K.  B.  Chapman,  Memorandum  on  an  international  bimetallic 
standard  measure  of  value,  in  Proceedings  of  the  International 
Monetary  Conference,  published  at  Cincinnati,  1881,  p.  188,  cf.  pp. 
186-7;  R.  H.  Patterson,  Is  the  value  of  money  rising  in  England 
and  throughout  the  tcorld  ?  Journal  of  the  Statistical  Society, 
London,  1880,  pp.  4,  6-7,  12,  etc.;  A  Schaffle,  in  Wissenschaft- 
liche  Gutachten,  etc.,  Berlin,  1893,  p  37;  H.  R.  Beeton,  The  case 
for  monetary  reform,  London,  1894,  pp.  16-17;  W.  H.  Harvey, 
Coin's  financial  school,  Chicago,  1894,  pp.  81-2,  in  The  great 
debate,  Chicago,  1895,  pp.  366,  388;  H,  G.  Miller,  Chapters  on 
silver,  Chicago,  1894,  pp.  34,  36,  a  dollar  "is  an  honest  dollar 
when  it  has  at  the  end  of  a  given  period  the  same  value  or 
purchasing  power  that  it  had  at  the  beginning  of  it,"  p.  35, 
similarly,  p.  105;  W.  H.  Smith,  The  effects  of  the  gold  standard, 
Chicago,  1895,  "  a  dollar  that   either   increases  or   diminishes  in 

*In  An  honest  dollar  he  says:  "An  ideal  dollar  would  buy  always 
precisely  the  same  amount  of  general  commodity,"  p.  10;  and  in  the 
revised  edition  of  this  essay,  published  at  Hartford,  1894,  in  which  bimet- 
allism is  advocated,  he  says:  "Satisfiable  or  unsatisfiable,  a  require- 
ment of  the  money  system  to  day  is  such  regulation  as  may  preserve  the 
purchasing  power  of  the  unit  of  value  permanently  identical  with  itself," 
pp.  23-4. 


226  SYSTEMATIC    REVIEW 

purchasing  power  is  unjust,"  p.  24;  H.  Denis,  La  depression  6co- 
nomique  et  social  et  Vhistoire  des  prix,  Brussels,  1895,  pp.  170, 
233. 

In  fact,  the  larger  number  of  bimetallists  take  for 
granted,  or  look  upon  it  as  axiomatic,  that  "value" 
means  exchange-value,  and  that  the  stability  commonly 
desired  in  money  is  stability  in  exchange -value, 
measured  by  the  commodity  standard.*  It  is  rare, 
therefore,  that  argument  for  this  position  is  found  in 
their  writings,  over  against  the  other  standards  and 
other  kinds  of  value.  A  few,  however,  have  attacked 
the  general  labor  standard,  among  whom  are  — 

H.  S.  FoxwELL,  in  Report  of  the  Proceedings  at  the  Annual 
Meeting  of  the  Bimetallic  League  at  Manchester,  Feb.  6,  1894, 
published  in  London,  1894,  pp.  56-8  (against  the  wages  standard); 
Andrews,  An  honest  dollar,  1st  ed.  pp.  10-11  (against  the  cost 
standard);  G.  H.  Shibley,  The  money  question,  Chicago,  1896,  pp. 
38-42,  (also  against  Professor  Clark's  half-and-half  standard,  pp. 
50-1). 

Some  of  these  economists  have  advised  the  inclusion 
in  the  lists  of  wages  (at  least  of  domestic  servants); 
but  none  has  paid  much  attention  to  the  subject  of 
weighting  in  connection  with  wages.  They  have  gen- 
erally attached  little  importance  to  wages  compared 
with  the  mass  of  commodities,  and  so  have  maintained 
the  commodity  standard  but  slightly  adulterated. 

§3.  Through  the  prices-and- wages  standard  there 
are  various  shades  in  the  transition  between  the  pure 

*An  exception  we  have  seen  in  L.  Courtney,  who  thought  bimet- 
allism would  lead  to  greater  stability  in  cost-value  (see  above,  p.  16). 
With  Courtney  may  be  compared  an  advocate,  not  of  bimetallism,  but  of 
symmetallism,  A.  P.  Stokes,  who  has  accepted  some  doctrine  of  labor  or 
cost  being  the  standard  of  value,  Joint-metallism,  New  York,  1895,  3cl 
ed.  pp.  71-2,  cf.  pp.  24,  85. 


CLASSIFICATION   OF   THE   STANDARDS  227 

commodity  standard  and  the  pure  wages  standard. 
Some  economists  have  advised  counting  the  wages  of 
laborers  employed  in  agriculture  and  manufactures  at 
only  a  small  figure  compared  with  all  commodities, — 
among  whom  may  be  mentioned  Professor  Leroy- Beau- 
lieu.*  Two  early  statisticians,  Evelyn  and  Young, 
actually,  in  their  tables,  counted  the  wages  of  farm- 
hands at  about  one  third  of  the  whole,  leaving  com- 
modities to  count  at  about  two  thirds.  And  recently 
the  same  division  between  labor  and  commodities  has 
been  recommended  by  Professor  Vilfredo  Pareto  in  his 
Cours  (f  Economie  politique,  Lausanne,  1896. t  Of  late 
also  the  importance  of  labor  has  been  increased  to  count 
equally  with  commodities,  which  is  a  position  we  have 
seen  occupied  by  some  economists  recommending  a  half- 
way position  between  these  two  separate  standards, 
namely  Mr.  Farquhar  and  Mr.  Davenport.  Sometimes 
even  greater  importance  has  been  attached  to  wages 
than  to  the  prices  of  commodities,  t 


*See  above,  p.  119n. 

t  Vol.  I.  pp.  281-2.  Pareto  does  not  seem  altogether  to  be  in  earnest 
on  this  subject.  In  an  earlier  article,  Considerazioni  sni  priiieipii  fon- 
damentali  delV  economia  politica  pnra,  Giornale  degli  economisti,  June 
1893,  he  confessed  he  did  not  know  nor  had  ever  seen  a  satisfactory  defi- 
nition of  "general  purchasing  power,"  p.  22.  He  there  condemned 
Walras's  plan  of  applying  the  multiple  standard,  pp.  23-4n;  which  con- 
demnation he  repeats  in  the  Cours,  adding  that  the  desirable  object  is 
not  for  money  to  retain  a  certain  mean  relation  to  commodities,  but  for 
the  world  to  advance  in  bien  etre,  Vol.  I.  pp.  2G6-7,  and  instancing  that 
England  is  better  off  now  with  a  low  index  number  than  it  was  in  1820- 
23  when  the  index  number  was  highest,  p.  282.  Such  argumentation 
is  unworthy  of  this  promising  economist. 

t  This  is  done,  e.  g.,  in  the  following:  "Gold  prices  fell  only  19  per 
cent,  from  1873  to  1891.  .  .  .  Wages,  in  gold,  rose  more  than  14  per 
cent,  from  1873  to  1891.  .  .  .  The  advance  in  wages  since  1873  so 
nearly  offsets  the  decline  in  prices  that  when  fairly  tested  by  both  prices 
and  wages  the  value  of  gold  in  1873  and  1891  was  practically  the  same," 


228  SYSTEMATIC    BE  VIEW 

§4.  Different  from  this  is  the  position  of  those  who 
assert  that  wages  are  a  better  means  of  measuring  the 
"vahie"  of  gold  than  prices.  These  do  not  mean  that 
in  a  single  list  including  prices  and  wages,  wages  should 
count  for  more  than  prices,  but  that  in  two  different 
ways  of  measuring  the  "value"  of  money,  namely  by 
means  of  prices  and  again  by  means  of  wages,  the 
method  of  measuring  it  by  wages  is  more  to  be  relied  on 
than  the  method  of  measuring  it  by  prices.  They  do 
not  see  that  they  are  using  the  term  "value"  here  in 
two  different  senses,  and  are  comparing  things  that 
should  not  be  compared.  They  are  virtually  saying  that 
the  measurement  of  the  "value"  of  money  by  means  of 
wages  is  a  better  measurement  of  its  "value"  than  that 
by  means  of  prices,  on  account  of  the  former  being  the 
proper  measurement  of  the  esteem -value  of  money, 
while  the  latter  is  only  the  proper  measure  of  its 
exchange-value.  But  if  the  method  by  prices  does  not 
pretend  to  be  a  measure  of  anything  but  the  exchange- 
value  of  money,  it  does  not  deserve  to  be  put  aside  for 
the  method  by  wages  on  account  of  this  being  the 
proper  method  of  measuring  the  esteem-value  of  monej--, 
unless  it  first  be  shown  that  the  only  "value"  of  money 
we  care  to  measure  is  its  esteem -value;  which  is  not 
done.  We  thus  meet  with  the  following  statements  by 
the  advocates  of  the  single  gold  standard:  — 

A.  Crump:  "The  best  of  all  guides,  perhaps,  to  a  solution  of 
whether  or  not  the  value  of  gold  has  appreciated  is  its  value  in 
labor.  .  .  .  Have  wages  fallen?  No."  Causes  of  the  great  fall 
in  prices,  London,  18S9,  p.  190. 

D.  A.  Wells:  "In  respect  to  the  one  thing  that  is  everywhere 


B.  W.  Holt,  Interest  and  appreciation,  Sound  Currency  (Reform  Club), 
New  York,  Nov.  15,  1898,  p.  368. 


CLASSIFICATION   OF   TEE   STANDARDS  229 

purchased  and  sold  for  money  to  a  greater  extent  than  any  other, 
namely  labor,  there  can  be  no  question  that  its  price  measured  in 
gold  has  increased.  .  .  .  Had  the  purchasing  power  of  gold 
increased  during  this  period,  a  given  amount  would  have  bought 
more  labor  and  a  fall  in  wages  would  have  been  inevitable. 
.  .  .  Measured  by  the  price  of  labor,  therefore,  gold  has. 
unquestionably  depreciated;  and  can  anybody  suggest  a  better 
measure  for  testing  the  issue?"  The  downfall  of  certain  financial 
fallacies,  Forum,  Oct.  1893,  p.  136. 

L.  A.  Garnett:  "Both  'capitalized'  and  'wage'  labor,  that 
enter  so  largely  into  the  value  of  all  the  products  of  human  in- 
dustry, furnish  a  much  more  stable  standard  of  comparison  than 
many  of  the  perishable  commodities  that  are  employed  for  the 
purpose."     Op.  cit.  p.  584. 

K.  Moore:  "A  better  measure  is  found  in  the  wages  of  labor. 
In  fact,  the  best  test  of  the  plenty  or  scarcity  of  any  article,  be  it 
wheat  or  gold,  is  the  amount  of  it  which  can  be  obtained  by  a 
day's  labor."  Farm  products,  wages  and  silver,  St.  Louis,  1895, 
p.  G. 

K.  Helfferich:  "The  prices  of  commodities  alone  are  not  to 
be  taken  into  account,  since  a  change  in  the  value  of  money  must 
also  affect  the  wages  of  labor.  Labor  also,  in  our  economic  con- 
ditions, is  a  'commodity,'  and  indeed  the  most  important.  Fur- 
thermore there  dwells  in  the  wages  of  labor  a  certain  tendency  to 
steadiness  of  value,  and  decidedly  a  stronger  such  tendency  than 
in  all  other  commodities.  .  .  .  Also  technical  improvements 
in  production  touch  only  the  prices  of  goods,  while  the  wages  of 
labor  are  uninfluenced  by  these  conditions.  Therefore  in  the  ex- 
amination of  variations  in  the  value  of  money,  a  greater  impor- 
tance and  force  of  proof  is  due  to  the  wages  of  labor  than  to  the 
prices  of  goods."  Die  TVahrungsfrage,  Stuttgart,  1895,  p.  19. 
"The  rise  of  wages  precludes  appreciation  of  gold,  since  a  fall  of 
wages  would  be  the  necessary  consequence  of  appreciation."  Der 
gcgenmirtige  Stand  der  Wdhrungsfragc,  Berlin,  1895,  p.  14.  (And 
in  both  works  he  proceeds  also  to  attach  much  importance  to  the 
rate  of  discount,  in  determining  variations  in  the  "value"  of 
"money.") 

Here  we  have  the  last  step  toward  the  wages  stand- 
ard pure  and  simple.     It  is  reached  entirely  by  other 


230  SYSTEMATIC    REVIEW 

recent  controversialists,  all  of  them  gold  advocates,  a 
few  specimens  of  whose  opinions  may  here  be  quoted:  — 

J.  C.  Leaver:  "Appreciation"  and  "depreciation"  do  not 
mean  "a  comparison  of  the  value  of  gold  with  other  commodities;  " 
and  "to  demonstrate  that  gold  has  or  has  not  'appreciated'  or 
'depreciated  '  we  must  not  merely  judge  by  the  prices  of  articles 
produced,  but  by  the  cost  of  obtaining  labor,  hour  by  hour,  which 
has  produced  them,"  and  as  wages  have  risen  considerably  during 
the  last  fifty  years,  gold  "has  heavily  depreciated."  Money,  Lon- 
don, 1893,  pp.  17,  18;  similarly  in  his  Bevieio  of  the  Rt.  Hon. 
Leonard  Courtney^ s  article  of  ^Bimetallism  once  more,'  London, 
1893,  pp.  4,  6. 

C.  C.  Jackson:  "Rightly  measured  —  that  is,  measured  by  the 
effort  needed  to  acquire  a  given  amount  of  it  —  gold  has  not  appre- 
ciated, but  has  depreciated  since  1873."  "Since  1873  prices, 
measured  in  gold,  have  fallen  10  per  cent,  while  wages  have  risen 
14  per  cent.  Is  it  proper  then  to  say  that  the  value  of  gold  has 
risen,  that  gold  has  appreciated,  when  it  can  be  got  with  less 
exertion  than  formerly?"  Has  gold  appreciated,  Boston,  1894, 
pp.  4,  6.* 

G.  E.  Leighton:  "As  the  test  of  abundance  is  rate  of  interest, 
the  one  supreme  test  of  value  of  money  is  the  reward  of  labor,  and 
that  test  applied,  a  day's  labor  is  worth  more  in  gold  than  at  any 
previous  period.  If  gold  had  appreciated  wages  would  have  de- 
clined." Why  we  oppose  free  coinage,  address  at  St.  Louis,  Nov. 
27,  1894,  p.  21. 

J.  DeWitt  Warner:  Measured  by  "the  one  commodity  of 
most  importance  to  men,  of  which  the  greatest  amount  is  bought 
and  sold  every  day  in  every  part  of  the  world  —  man's  labor," 
gold  has  been  steadily  growing  cheaper.  Free  coinage  dissected, 
Sound  Currency,  July  15,  1895,  p.  376. 

R.  G.  Horr:   "Wages  are  70  per  cent,  higher,  paid  in  gold, 


*He  also  speaks  of  "the  absurdity  of  estimating  the  appreciation  of 
gold  by  prices  merely,  "p.  7.  But  why  estimate  it  b}-  prices  at  all,  if  it 
is  "rightly"  estimated  by  wages?  He  accordingly  defends  paj'ment  of 
debts  in  money  appreciated  in  commodities  if  not  appreciated  in  labor, 
because  workmen  can  then  pay  their  debts  with  undiminished  facilit)^ 
pp.  27-8,  cf.  pp.  6-7. 


CLASSIFICATION   OF   THE   STANDARDS  231 

for  the  same  amount  of  work,  than  in  18G0.  Has  not  gold  depre- 
ciated then  when  you  measure  it  with  the  great  commodity  of 
human  toil?"     In  The  great  debate,  Chicago,  1895,  p.  242. 

J.  T.  McCleary:  "There  is  one  commodity  which  stands  out 
by  itself  preeminent  ...  a  commodity  which  is  the  truest 
and  best  measure  of  value  ever  discovered  .  .  .  and  that  is  a 
given  unit  of  human  labor.  .  .  .  The  wages  of  labor  have 
been  on  the  average  largely  increased."  Speech  in  the  House  of 
Representatives,  Feb.  12,  1896,  "Washington,  1896,  p.  11,  but 
of.  p.  44. 

M.  A.  Miller:  Gold  has  since  1873  shown  "a  loss  of  purchas- 
ing power  for  the  standard  measure,  labor"  (but  is  best,  as  fluctu- 
ating least).  Gold  or  silver?  New  York,  1896,  p.  53,  cf.  p.  109. 
(But  at  the  start  he  laid  down  a  "foundation  principle"  that  "labor 
and  raw  materials  are  the  only  true  measures  of  value.  ") 

L.  G.  Powers:  "We  note  a  tremendous  fall  in  the  purchasing 
power  of  gold  over  or  in  exchange  for  human  labor,  the  only  final 
measure  for  testing  the  value  of  gold  or  any  other  commodity. " 
Fifth  annual  report  of  the  Bureau  of  Labor  of  the  State  of  Min- 
nesota, St.  Paul,  1896,  p.  508.  (This,  however,  after  much  testing 
of  gold  by  means  of  prices.) 

R.  L.  Nash:  "Man's  labor,  and  woman's  labor  too,  have  not 
fallen  in  value  [i.  e.  money- value],  and  that  is  the  best  of  all  tests 
we  can  apply  to  the  gold  standard,  to  ascertain  whether  it  is  ap- 
preciated or  depreciated."  Why  Australia  believes  in  a  single  gold 
standard,  Gold  Standard  Defence  Association,  Leaflet  No.  25, 
London,  June  1897,  p.  8. 

The  wages  standard  has  been  advocated  by  others 
beside  the  defenders  of  the  gold  standard.  Just  as  we 
have  seen  that  some  economists  would  like  to  have 
paper  money  issues  regulated  with  a  view  to  keeping 
money  stable  in  exchange -value,  so  others  have  recom- 
mended that  they  should  be  regulated  with  a  view  to 
keeping  money  stable  in  esteem -value,  by  keeping  con- 
stant the  level  of  wages  (or  of  earnings  in  general). 
This  we  have  already  seen  advised  by  John  Gray  and 
by  Mr.  Pollard.     It  would  also  be  the  logical  outcome 


232  SYSTEMATIC    REVIEW 

of  the  position  of  Mr.  J.  Borden,  who,  in  an  Essay 
on  Value  with  a  Short  Account  of  American  Currency, 
Chicago,  1896,  wants  all  issues  to  be  in  the  hands  of 
government,  in  order  to  a  better  control  of  the  value 
of  money,  and  who  maintains  the  labor  standard  in  the 
wages  form  (pp.  85-6). 

For  clearness  of  views  it  would  be  desirable  that  all 
persons  who  recommend  the  gold  standard,  or  any  other 
monetary  system,  on  this  ground,  should  recognize  and 
declare  that  they  are  followers  of  Adam  Smith  and 
Malthus,  and  that  they  hold  the  same  position  in  eco- 
nomics with  Mr.  Shadwell;  and  if  such  doctrines  pre- 
vail in  practice,  it  is  desirable  that  they  should  prevail 
in  theory,  and  that  the  wages  standard  should  be  taught 
in  text -books  of  political  economy  as  the  true  stand- 
ard of  "value,"  with  avowed  exclusion  of  every  other 
standard. 

§5.  Instead  of  the  wages  standard,  the  cost  stand- 
ard^has  also  been  urged  by  the  gold  advocates,  and  by 
others.     Some  examples  are  the  following:  — 

M.  Quenstedt:  "The  value -substance  in  things  is  the  human 
labor  spent  on  their  production."  "The  measure  of  unskilled  labor 
is  time.  Therefore  the  amount  of  value  in  an  object  depends  upon 
the  quantity  of  labor-time  its  production  cost."  "Only  the  labor 
that  is  transformed  into  objects  of  use  constitutes  value."  "Per- 
manently the  price  [=  value]  of  a  commodity  can  fall  only  if  its 
costs  of  production  become  smaller."  Zur  deutschcn  Wahrungs- 
und  Miinzfrage,  Berlin,  1871,  pp.  15-19. 

R.  Hamilton:  "The  great  principle  in  the  economy  of  the 
industry  of  a  free  people,  is  that  the  labor  bestowed  in  rendering 
these  'gifts'  available  for  use,  and  not  the  'gifts'  themselves,  is 
the  ultimate  basis  of  the  kind  of  value  which  can  be  rightly 
brought  into  question  between  man  and  man."  Money  and  value, 
London,  1878,  p.  170  (but  he  adds,  "though  the  relative  service- 
ableness  of  the  labor  bestowed  cannot  be  left  out  of  account"). 


CLASSIFICATION   OF   THE   STANDARDS  233 

Russell:  "If  we  could  institute  a  system  of  statistics  which 
should  classify  the  value  of  all  things  according  to  the  quantum  of 
a  normal  day's  laboi'  or  of  a  normal  labor-effort,  and  if  we  could 
then  say:  in  this  commodity  are  contained  so  and  so  many  normal 
labor-efforts  or  so  and  so  many  normal  days'  labor,*  — all  which, 
however,  we  cannot  do, —  then  we  should  have  such  a  measure  of 
value  as  we  have  in  physics  a  measure  of  force  for  steam  in  horse- 
power," etc.  In  Verhandlungen  der  deutschen  Silberkommission, 
8-17  Sitzung,  Berlin,  1894,  p.  78.  (A  little  later  he  speaks  of 
prices  having  fallen  because  of  lowered  cost  of  production.) 

C.  G.  Harger:  Not  labor  itself,  but  "the  result  of  productive 
labor  is  the  true  standard  of  value."  The  true  standard  of  value, 
Washington,  1895,  pp.  11,  14,  26.  (Holds  that  the  "unit  of.value" 
should  represent  the  grand  average  result  of  productive  labor  per- 
formed in  a  given  time  by  the  most  skillful  and  efficient  persons 
in  various  crafts  and  professions,  with  families,  and  sufficient  for 
respectable  living  and  for  old  age,  pp.  26-7;  and  thinks  that  the 
average  product  of  eight  hours  a  day  is  now  in  the  United  States 
$4.9707,  pp.  29-30.  The  idea  seems  to  be  that  the  average  product 
of  eight  hours  of  labor  should  always  be  worth  this  sum.) 

Moreover,  as  we  have  twice  reviewed  opinions  to  the 
effect  that  thejssue  of  paper  money  ought  to  be  regu- 
lated with  a  view  to  stability  of  money,  Recording  to 
some,  in  exchange-value,  and  according  to  others,  in 
esteem -value,  so  again  the  regulation  has  been  desired 
to  aim  at  procuring  stability  in  the  cost -value  of  money. 
This  idea  we  have  already  seen  recently  advanced  by 
Professor  Loria.t 

*  Cf.  Quenstedt  above,  and  Karl  Marx. 

tThe  same  end  is  thought  to  be  attained  automatically  by  free  or 
mutual  bankinor,  with  detachment  of  money  from  any  one  substance  (cf. 
Steuart  and  Lipke  above,  pp.  44-r)n,  the  idea  being  that  money  would  then 
be  free  from  the  causes  of  variation  inherent  in  the  substance  to  which  it  is 
now  attached-the  costs  of  its  production -and  would  therefore  not  be  sub- 
ject to  any  causes  of  variation,  the  supply  always  equaling  the  demand), 
by  M.  MoNGiN,  Les  changements  de  valuer  de  la  mouitaie,  Revue 
d'Economie  politique,  1887,  and  by  W.  A.  Whittick,  Value  and  an  f?!- 
variable  %init  of  value,   Philadelphia,  1896.      Both  these  writers  think 


234  SYSTEMATIC    REVIEW 

There  is  no  such  gradual  approach  to  the  cost  stand- 
ard from  the  commodity  standard  as  there  is  in  the  case 
of  the  wages  standard.  But  we  have  seen  some  econo- 
mists occupying  a  halfway  position  between  the  two. 
These  are  Professor  Clark,  Professor  Bohm-Bawerk, 
Major  Darwin,  and  Dr.  Adams. 

The  supporters  of  the  cost  standard  have  nowadays 
shown  their  hand  mostly  by  approving  of  a  general  fall 
of  prices  in  conformity  with  improvements  in  the  pro- 
duction of  commodities  other  than  the  metal  used  for 
money.  As  this  condition  of  falling  prices  is  also  com- 
mended by  the  upholders  of  the  wages  standard,  and  as 
the  defense  of  falling  prices  has  been  the  principal  sub- 
ject of  interest,  the  distinction  between  these  standards 
has  not  been  clearly  observed.  Some  statements  in 
which  it  is  impossible  to  tell  which  standard  is  advocated 
may  here  be  quoted:  — 

J.  Patterson:  "The  real  unit  of  value  —  the  unit  recognized 
by  God  and  humanity  —  is  a  day's  work."  Speech  at  the  Conven- 
tion in  Memphis,  May  1895,  reprinted  in  A  dollar  worth  a  dollar, 
New  York,  1895,  p.  60.  "I  have  repeatedly  said  that  a  day's  work 
was  the  true  unit  of  value,  and  that  that  country  was  the  most 
blessed  and  enjoyed  the  greatest  prosperity  where  a  day's  labor 
brought  to  the  toiler  the  most  comforts  of  life."  Speech  in  the 
House  of  Representatives,  Feb.  7,  1898,  separate  reprint,  p.  13. 
Similarly,  Speech  at  Kansas  City,  March  18,  1896,  p.  13  (he  here 
speaks  of  the  advantage  of  having  "a  stable  standard  of  value," 

that  prices  could  then  vary  only  with  variations  in  the  values  or  the 
costs  of  the  commodities  themselves,  no  interference  comins:  from 
money,  which  would  be  invariable  in  the  attribute  of  value  or  difficulty  of 
attainment,  as,  in  their  opinion  it  ouglit  to  be  (the  former,  pp.  153-(i;  the 
latter,  pp.  81ff.).  The  latter  especially  condemns  repayment  of  debts  in 
tlie  commodity  standard  as  unjust  in  case  of  improved  production,  p. 
02,  wanting  it  to  be  in  the  same  amount  of  difficulty,  pp.  02,  04,  78,  86, 
value  being  "the  measure  of  service,"  p.  64.  He  relies  here  upon 
Proudhon. 


COMPARISON   OF   THE    STANDARDS  235 

yet  complains  that  the  Mexican  laborers  do  not  get  higher  wages 
now  that  silver  is  "depreciated"). 

Oa  account  of  this  mixture  of  the  two  standards  by 
their  modern  adherents  we  need  not  ourselves  be  too 
particular  about  sepai-ating  them;  and  in  the  following 
pages  our  eifort  shall  be  rather  to  contrast  the  commod- 
ity standard  with  the  vague  labor  standard,  than  singly 
with  either  of  the  two  standards  that  are  mingled  in  this 
imperfect  compound. 


CHAPTER    III 

COMPARISON   OF   THE   PRINCIPAL  STANDARDS 

§1.  The  contrast  between  the  commodity  standard 
and  the  labor  standard  may  be  drawn  by  noticing  the 
attitude  which  economists  in  their  references  to  varia- 
tions in  the  "value"  of  money  assume  toward  two 
different  matters.  These  are  (I)  the  causes  of  the 
variations  in  question,  and  (II)  the  distribution  of 
wealth  which  is  their  effect.  Each  of  these  again  falls 
into  two  divisions.  Causes  are  found  both  (1)  in  the 
improvement  of  production,  and  (2)  in  the  abundance  of 
the  articles  produced.  And  distribution  is  both  (3) 
between  creditors  and  debtors  through  contracts,  and  (4) 
between  employers  and  employees  through  wages. 

I.  (1).  Attitude  toward  improvements.  (A.)  In  gen- 
eral those  economists  are  dealing  with  "value"  in  the 
sense  either  of  cost -value  or  of  esteem -value  (principally 
the  former)  and  want  money  to  be  stable  in  such  value, 
who  say  that  before  inferring  from  a  change  in  the  level 
of  prices  a  change  in  the  "value"  of  money  we  must 


238  SYSTEMATIC    REVIEW 

examine  whether  the  cause  of  the  change  in  the  rela- 
tion between  money  and  commodities  does  not  lie  on  the 
side  of  the  commodities,  occasioning  their  "values"  to 
change,  without  affecting  the  "value"  of  money.  All 
are  such  who  thus  draw  a  distinction  between  a  variation 
in  the  level  of  prices  due  to  causes  residing  in  money 
and  a  variation  due  to  causes  residing  in  commodities, 
and  in  the  case  when  a  general  fall  of  prices  may  be 
ascribed  exactly  to  cheapening  of  the  costs  of  production 
of  the  goods  think  that  this  shows  money  to  be  stable  in 
"value,"  and  admit  a  variation  in  the  "value"  of  money 
only  so  far  as  it  can  be  shown  either,  directly,  that  the 
money- material  has  varied  in  the  cost  of  its  production, 
or,  indirectly,  that  the  variations  of  prices  are  not 
wholly  accounted  for  by  the  variations  in  the  costs  of 
production  of  the  goods,  wherefore  a  part  of  the  varia- 
tion of  the  prices  must  be  due  to  a  variation  in  the  cost 
and  in  the  "valne"  of  the  money-material.  Such  also 
are  all  those  who  are  satisfied  with  an  explanation  of  the 
fall  of  prices  that  has  taken  place  at  certain  periods  by 
finding  its  causes  in  the  cheapening  of  production  or 
transportation  in  every  commodity  singly,  thereby 
exculpating  money  (gold)  from  any  share  in  the  cause 
of  the  falls  either  individually  or  collectively. 

W,  Lexis:  "The  only  proper  inquiry  is  to  pick  out  and  set 
aside  the  moments  which  lie  in  tlie  commodities  themselves,  and 
to  see  what  is  left  over.  If  there  is  a  remainder  that  cannot  be 
explained  in  this  way,  we  should  be  justified  in  saying  that  this 
was  the  effect  of  the  inner  appreciation  of  gold."  In  Verhandlungen 
der  deutschen  Silberkoramission,  8-17  Sitzung,  Berlin,  1894.  (This 
is  the  indirect  measurement.  The  direct  measurement  we  have 
seen  advised  by  Loria.) 

The  procedure  of  explaining  the  general  fall  of  prices  by 
examining  the  special  causes  that  have  operated  upon  many  com- 


COMPARISON   OF   THE   STANDARDS  237 

modities  singly  and  separately,  with  refusal  to  admit  a  rise  in  the 
"value"  of  money  (at  least  to  anything:  like  the  corresponding 
extent),  was  recommended  and  practiced  in  the  period  of  falling 
prices  1820  50  by  Ricardo,  pp.  400-1;  McCulloch,  Note  to 
Wealth  of  Nations,  p.  498b;  Malthus,  Principles,  p.  58;  Bab- 
BAGE,  p.  158;  TooKE,  passim.  And  again  in  the  later  period  of 
falling  prices  after  1873  by  S.  Bourne,  On  some  phases  of  the  silver 
question,  Journal  of  the  Statistical  Society,  London,  1879,  pp.  418- 
19,  453-1,  cf,  408,  434;  Leroy-Beaulieu,  La  laisse  des  prix  et  la 
crise  commcrciale,  Revue  des  Deux  Mondes,  May  15,  1886,  pp.  395- 
403;  H.  Forssell,  The  appreciation  of  gold  and  the  full  of  prices  of 
commodities,  (English  translation,)  London,  1886;  W.  Fowler, 
The  appreciation  of  gold,  London,  1886;  F.  Kral,  Geldwert  und  die 
Preislewegimg  im  Deutschen  Eeiche  1871-1884,  Jena,  1887,  pp.  66 
ff. ;  Laughlin,  Gold  and  prices,  etc. ;  E.  Nasse,  Das  Sinken  der 
Warenpreise  wdhrend  der  letzten  fiinfzehn  Jahre,  Jahrbucher  fUr 
Nat.-oekon.  und  Statistik,  1888,  pp.  56-63;  Gold  and  Silver  Com- 
mission, Second  Report,  1888,  Evidence  by  B.  Currie,  q.  6885,  H. 
L.  Raphael,  q.  6963,  H.  W.  Blake,  qq.  7407,  7415,  W.  Fowler, 
qq.  7704,  7815-16;  Bramwell,  qq.  8850,  8885-6,  N.  G.  Pierson, 
p.  254  (admits  slight  appreciation,  but  not  so  much  as  indicated 
by  the  fall  of  prices),  and  the  gold  advocates  in  the  Final  Report, 
Part  II.  U  25-6,  47,  71,  79,  99;  Crump,  op.  cit.  pp.  19-20,  34, 
(though  allowing  increased  purchasing  power  to  gold,  yet  claims 
"there  has  been  no  material  change  in  that  purchasing  power 
which  is  due  to  scarcity"  of  gold,  p.  34,  cf.  Malthus's  "power  of 
purchasing  arising  from  intrinsic  causes");  Wells,  Recent  eco- 
nomic changes,  pp.  123-89,  191,  202,  205,  also  in  Second  Report  of 
the  Gold  and  Silver  Commission,  p.  272  (not  due  to  appreciation 
of  gold)  ;*  Farrer,  pp.  62,  131-2,  252,  264,  271 ;  Macleod,  Theory 
of  credit,   p.    538;    H.    White,    The   gold   standard.    Address   at 


*/.  e.  not  due  to  increased  cost  of  production  of  gold.  Thus  in  an 
article  on  The  silver  question,  1877,  reprinted  in  Practical  economics. 
New  York,  1887,  he  said  that  gold  and  silver  had  "depreciated  "  during 
the  preceding  thirty  years  because  of  the  cheaper  production  of  ihera 
owing  to  better  transportation,  etc.,  and  he  expected  a  continuation  of 
this  "depreciation  in  the  value"  of  gold,  p.  51.  But  in  Eecent  economic 
changes  he  once  alters  the  phraseology  and  allows  "appreciation"  to  be 
synonymous  with  falling  prices,  p.  207n. 


238  SYSTEMATIC    REVIEW 

Chicago,  June  20,  1893,  published  at  New  York,  1893,  pp.  31-2, 
Money  and  hanking,  p.  110  (follows  Wells);  E.  Atkinson,  The 
battle  of  the  standards  and  the  fall  of  prices,  Forum,  New  York, 
April  1895,  pp.  144,  ff. ;  Soetbeer,  la  Zur  Wdhrungsfrage, 
Verhandlungen  .  .  .  herausgegeben  von  dem  Handelskammer 
zu  Hamburg,  1895,  pp.  9-10,  25-6;  Helfferich,  Die  Wdhrungs- 
frage, p.  32 ;  F.  Thorwart,  Soil  Deutschland  seine  Goldwdhrung  auf- 
geben?  Stuttgart,  1895,  pp.  9-10;  T.  Drapala,  Die  Ursachen  der 
sinken  der  Preisbewegung ,  Aus  Handel  und  Industrie,  Zittau  i.  S., 

1895,  pp.  350-1;  A.  Elissen,  The  errors  and  fallacies  of  bimet- 
allism, London,  1895,  pp.  11,  14-26;  J.  G.  Carlisle,  Speech  at 
Memphis,  May  23,  1895,  pp.  28-30;  J.  DeWitt  Warner,  op.  cit. 
p.  376;  McCleary,  op.  cit.  p.  43  (cf.  p.  23);  Pareto,  Cours,  Vol. 
I.  p.  266;  G.  Shaw  Lefevre,  Bimetallism  and  agricultural  depres- 
sion, Gold  Standard  Defence  Association,  Leaflet  No.  17,  London, 

1896,  pp.  3,  4-6;  J.  Schoenhop,  ^4  history  of  money  and  prices. 
New  York,  1896,  passion  (see  especially  p.  16) ;  G.  M.  Fiamingo, 
The  measure  of  the  value  of  money  according  to  European  economists, 
Journal  of  Economics,  Chicago,  Dec.  1898,  p.  77.* 


♦Even  during  the  period  of  rising  prices  1850-1870  the  rise  was 
sometimes  explained  as  due  to  increased  demand  produced  by  increased 
wealth,  and  so  accounted  for  without  resorting  to  a  change  in  the  value 
of  money.  So  V.  Lanjuinais,  Nouvelles  recherches  sur  la  question  de 
Vor,  Revue  des  Deux  Mondes,  July  1,  IS.'iS,  pp.  122-4;  Bokdet,  op.  cit. 
pp.  30-6;  V.  Bonnet,  La  variation  des  prix,  in  the  same  Revue,  Aug. 
15,  1869.  pp.  945-6,  955,  reprinted  in  Etudes  sur  la  monnaie,  Paris,  1870, 
pp.  42-5,  65-7  (spoke  of  "the  alleged  depreciation,"  which  he  denied; 
but  later  admitted  it  for  this  period,  La  eirculation  fiduciaire  et  la  crise 
actuelle,  in  the  same  Revue,  April  1,  1884,  p.  686).  This  is  the  same 
tendency  of  thought  (to  exculpate  gold),  but  with  less  justification,  since 
it  can  rest  upon  no  kind  of  value  in  which  money  can  be  represented  as 
stable.  Similarly  in  the  period  of  rising  prices  at  the  end  of  the 
eighteenth  century,  which  culminated  daring  the  paper  inflation  at  the 
beginning  of  the  nineteenth,  there  was  an  opinion  (said  by  Adam  Smith 
to  be  prevalent,  p.  99a,  and  ascribed  by  him  to  the  mercantile  system,  p. 
110a)  that  the  progress  of  civilization  and  wealth,  with  increased  popu- 
lation and  taxation,  etc.,  naturally  leads  to  higher  prices;— C.  Bosan- 
QUET,  Practical  observations  on  the  Report  of  the  Bullion  Committee, 
London,  1810,  2d  ed.  p.  l.'?2;  A.  Young,  Enquiry  into  the  progressive 
value  of  money,  etc.,  pp.  77,  86-7,  119-24;  Craufuud,  pp.  126,  144,  146, 
160;   (an  opinion  which  has  survived  in  A.  G.  Coubnot,  Recherches  sur 


COMPARISON   OF  THE   STANDARDS  239 

A  general  fall  of  prices  is  sometimes  principally  ascribed  to 
prolonged  peace,  as  permitting  improvement  and  increase  in  the 
production  of  commodities  [other  than  the  money-material],  while 
war  causes  rise  of  prices  by  interfering  with  production.  So 
Childers  in  L'Economiste  franijais,  Dec.  11,  1886,  p.  719,  and 
McCleary,  op.  cit.  p.  9,  again  p.  44. 

Similar  is  also  the  position  of  those  who  generalize 
from  such  concrete  cases,  and  who  maintain  that  the 
progress  of  civilization  leads  normally  towards  a  reduc- 
tion of  prices,  without  the  fault  of  variation  therefore 
attaching  to  monej',  on  the  ground  that  it  is  proper  for 
prices  to  follow,  and  to  mark,  the  reduced  costs  of  pro- 
ducing commodities.  Such  a  position  we  have  seen 
sometimes  entertained  by  J.  B.  Say,  J.  Garnier,  Fawcett, 
and  others,  and  consistently  by  Chevalier,  Wisner,  etc. 
It  is  stated  in  the  following  extracts:  — 

Addington:  "Every  scientific  advance  tends  to  the  depression 
of  prices. "  Evidence  before  the  Gold  and  Silver  Commission, 
Second  Report,  p.  212b. 

Brough:  "With  the  increase  of  supply  [since  the  introduc- 
tion of  machinery,  etc.],  comes  the  reduction  in  price.  This  is 
the  natural  order  of  progress,  of  civilization. "  The  natural  laio 
of  money,  p.  42. 

E.  Carroll,  Jr.:  "The  more  perfect  and  general  becomes  the 
use  of  machinery,  .  .  .  the  greater  becomes  the  supply,  or 
the  less  the  effort  to  secure  it,  the  lower  prices  must  go.  The 
whole  aim  and  trend  of  civilization  for  the  last  two  hundred  years 
has  been  in  this  direction. "  Principles  and  practice  of  finance, 
New  York,  1895,  p.  52.* 


les  principes  matMmatiques  de  la  thiorie  des  richesses,  Paris,  1838,  p. 
2G;  C.  MORAN,  Money,  New  York,  18G3,  pp.  12G-7). 

*This  is  so,  of  course,  only  if  the  improvement  in  production  does 
not  extend  to  the  money-metal.  The  opinion  of  Jevons,  Investigations, 
p.  158  (cf.  pp.  110,  128,  131-2,  138),  and  of  Giffen,  Essays,  2d  Series,  pp. 
29-30,  33,  93,  Case  against  bimetallism,  p.  71  (cf.  also  C  F.  Bastabi.-, 
art.  Money  in  the  Encyclopaedia  Britannica,  9th  ed.,  1883,  Vol.  XVI.  p. 


240  SYSTEMATIC    REVIEW 

Bordering  upon  fanaticism  in  adherence  to  this  posi- 
tion, is  the  opinion  of  those  who  think  it  is  the  natural 
course  of  civilization  for  prices  to  fall  with  falling  costs 
(of  commodities,  as  if  it  were  natural  for  gold  to  be 
stable  in  cost- value),  and  who  condemn  anything  else 
as  if  to  prevent  the  fall  of  prices  were  to  prevent  the 
reduction  of  costs.  Here  may  be  quoted  passages  which 
would  surely  have  never  been  penned  if  their  authors 
had  paused  to  reflect  a  moment:  — 

M.  G.  Mulhall:  "It  would  be  monstrous  if  prices  remained 
the  same  in  spite  of  cheapened  transport,  improved  machinery, 
and  all  the  efforts  of  scientific  progress."  History  of  prices  since 
the  year  1850,  London,  1885,  p.  5. 

Wells:  "He  who  attempts  to  check  or  counteract  such  a  re- 
duction of  prices  is  opposed  to  increasing  civilization  and  an 
enemy  of  the  poor."  Recent  economic  changes,  pp.  250-1,  cf.  pp. 
78.  258,  447. 

L.  Bamberger:  "Just  because  there  has  been  an  improvement 
in  living,  it  would  be  false  to  work  against  such  improvement  by 
seeking  to  raise  the  prices  of  the  mass  of  commodities  and  thereby 
to  depress  again  the  general  improvement."  Die  Stichicorte  der 
Silherleute,  Berlin,  1893,  p.  54. 

[H.  WhiteJ  :  "The  whole  silver  movement  is  simply  a  pre- 
posterous attempt  to  keep  prices  up  when  science,  art,  invention, 
discovery  are  knocking  them  down."  Editorial  in  New  York  Even- 
ing Post,  March  30,  1894.* 

Schoenhof:  "As  cheapness  is  the  result  of  plenty  and  of  law 
and  order,  it  is  difficult  to  see  how  the  phenomenon  [of  extraordi- 
narily low  prices]  can  be  changed  except  by  turning  the  hands  on 


721b),  that  falling  prices  are  to  be  expected  as  the  normal  course  of 
things  in  the  future  on  account  of  improvements  in  production  falling 
more  on  the  side  of  commodities  than  on  the  side  of  the  precious  metals, 
is  of  a  different  nature,  since  it  does  not  ascribe  this  expected  course  to 
the  advance  of  civilization,  but  to  the  one-sidedness  of  such  advance, 
and  does  not  involve  approval  of  it  by  identifying  it  with  such  advance. 
*For  a  good  criticism  of  this  see  an  article  from  the  Baltimore  Dela- 
warean  quoted  by  Stokes,  op.  cit.  pp.  115-17. 


COMPARISON  OF  THE   STANDARDS  241 

the  dial  backward,  drowning  inventors  and  destroying  the  improved 
tools,  as  was  the  practice  in  the  past."     Op.  cit.  p.  307. 

Similarly  Whittick  looks  upon  stability  of  prices  as  "a  denial 
of  progress,"  on  the  ground  that  our  aim  should  be  to  reduce  costs 
(=  values  =  prices),  op.  cit.  pp.  120-1. 

More  iutelligent  advocacy  of  stability  of  money  in 
cost -value  is  shown  by  those  who  recognize  that  a  vari- 
ation in  the  cost  of  production  of  the  money -material 
in  accord  with  the  average  variation  of  the  cost  of  pro- 
duction of  commodities  in  general  (in  a  more  even  ad- 
vance of  civilization)  would  maintain  the  average  of 
prices  at  a  constant  level,  but  who  do  not  want  this 
condition,, thinking  that  it  would  mean  a  fall  of  money 
in  "value"  along  with  the  fall  of  commodities  in 
"value,"  and  desiring  that  money  should  remain  con- 
stant in  "value"  while  commodities  fall  in  "value." 
This  is  found  in  the  following:  — 

E.  Nasse:  "A  decrease  in  the  amount  of  labor  and  capital 
needed  for  production  could  not  remain  without  influence  upon  the 
money  prices  of  the  products,  if  money  had  the  qualities  of  a  good 
measure  of  value.  Unless  the  causes  directly  determining  the 
price  [=  value]  of  money  changed,  a  widespread  fall  of  prices  would 
have  to  set  in.  Only  if  there  had  existed  on  the  side  of  money  an 
equally  powerful  tendency  toward  cheapness,  would  it  have  been 
possible  for  those  products  to  maintain  their  prices?"  In  the 
Preussische  Jahrbiieher,  March  1885  (quoted  by  Soetbeer  in  his 
Materkdien,  Berlin,  1886,  p.  84a).  Similarly  also  again:  "In  the 
last  twenty  years  a  very  great  decrease  in  the  cost  of  production 
of  nearly  all  important  commodities  has  set  in,  and  this  of  necessity 
found  its  expression  in  the  prices  of  the  commodities,  as  it  was  not 
accompanied  by  corresponding  alterations  in  the  cost  of  the  pro- 
duction of  money.  .  .  .  All  this  must  have  depressed  the  price 
of  neai'ly  all  commodities,  provided  that  gold  remained  a  steady 
standard  of  value."  In  the  Second  Report  of  the  Gold  and  Silver 
Commission,  p.  258b.  (And  he  here  recognizes  that  the  rise  in 
prices  between  1850  and  1860  was  due  to  the  fact  that  "the  great- 


242  SYSTEMATIC    REVIEW 

est  diminution  in  tlie  cost  of  production  took  place  in  regard  to 
gold"  p.  259a,  and  he  prefers  the  conditions  since  1873,  p. 
261b.)* 

Helfferich:  "The  value  of  money  remaining  constant,  the 
cheapening  of  production  and  transportation  must  everywhere  lead 
to  a  fall  of  the  prices  of  commodities,  in  Europe  as  well  as  in 
India."  But  in  India  prices  (in  silver)  have  not  fallen,  and  even 
have  risen,  because  there  "there  were  in  operation  at  the  same 
time  two  circumstances:  on  the  side  of  commodities,  the  cheapen- 
ing of  production  and  transportation,  which  under  otherwise  equal 
conditions  must  have  led  to  a  fall  of  prices;  and  [on  the  side  of 
money]  the  depreciation  of  silver  [=:the  cheapening  of  its  pro- 
duction], which  under  otherwise  equal  conditions  must  have  led  to 
a  rise  of  prices.  The  latter  factor  not  only  paralyzed,  but  out- 
weighed, the  former.  The  rise  of  prices  in  the  silver-countries, 
in  spite  of  the  cheapening  of  production,  etc.,  finds  its  natural 
explanation,  therefore,  in  the  depreciation  of  silver  and  conse- 
quently of  silver  money,  and  can  at  best  prove  the  depreciation  of 
silver,  which  is  plain  even  without  it,  but  not  an  appreciation  of 
gold."    Der  gegemciirtige  Stand,  etc.  pp.  13-14. 

Similar  balancing  of  the  cost  of  producing  the  money-material 
with  the  costs  of  producing  other  commodities,  without  expressing 
desire  for  the  stability  of  exchange-value  thereby  obtainable,  or 
without  abiding  by  it,  or  repudiating  it,  may  be  found  also  in 
Bailey,  in  his  various  works;  Cairnes,  op.  cit.  p.  411;  Giffen, 
Essays,  2d  Series,  p.  23;  W.  Scharling,  Der  Detailhandel  und  die 
Warenpreise,  Jahrbiicher  fiir  Nation-oekon.  und  Statistik,  1886,  pp. 
320-1;  Farrer,  pp.  218,  304-5,  366,  382;  Laughlin,  Facts  about 
money,  pp.  76,  109-10,  114,  192,  194,  196,  250;  Davenport,  Ele- 
mentary economics,  p.  150. 

In  particular,  they  want  stability  of  money  in  cost- 
value  who  —  writing  before  the  recent  developments  in 
gold  mining  —  regarded,  and  recommended,  gold  as  a 
better  standard  of  "value"  than  silver  on  the  ground 


*  Yet  he  here  says,  "A  slower  alteration  of  prices  [since  1873]  would, 
in  my  opinion,  have  been  better,"  p.  261a.  But  this  could  not  be  without 
gold  ceasing  to  be  a  ''steady  standard  of  value,"  unless  he  held  that 
actuallj'  gold  had  risen  somewhat  even  in  (cost) -value. 


COMPARISON  OF   THE  STANDARDS  243 

that  gold  is  produced  mostly  by  unskilled  labor,  without 
the  aid  of  machinery,  and  so  is  little  subject  to  improve- 
ments in  production,  while  the  production  of  silver  is 
more  a  regular  industry  and  therefore,  like  that  of  most 
commodities,  subject  to  improvements  due  to  advance  of 
science,  which  means,  in  their  phraseology,  a  "deprecia- 
tion "  of  its  "value."  This  view  may  be  found  in  the 
following  references:  — 

Chevalier,  art.  Monnaie  in  the  Dictionnaire  d'Economie 
politique,  1854,  pp.  205-6  (referring  to  Senior),  cf.  in  the 
Revue  des  Deux  Mondes,  April  1st  1847,  p.  46;  Levasseur,  La 
question  de  I'  or,  pp.  332-3;  Carreras,  p.  330;  Quenstedt,  op. 
cit.  pp.  21-3;  Shadwell,  p.  292  (referring  to  Cherbuliez) ;  Jevons 
(in  later  period),  Investigations,  p.  311;  Wells,  Recent  economic 
changes,  pp.  255-6;  Leaver,  op.  cit.  p.  8;  S.  Waterloo,  Honest 
Money,  Chicago,  1895,  p.  52. 

(B).  On  the  other  hand,  economists  that  may  be 
definitely  held  to  wanting  stability  of  money  in  ex- 
change-value proper,  in  accordance  with  the  commodity 
standard,  are  those  who  hold  that  variation  in  the 
"value"  of  money  is  directly  indicated  by  a  change  of 
the  level  of  prices,  and  who  add  that  this  is  so  inde- 
pendently of  the  position  of  the  causes  operating  on 
prices,  that  is,  without  regard  to  whether  the  causes 
are  on  the  side  of  commodities  or  on  the  side  of  money, 
whether  the  change  in  the  labor  cost  of  production  is  in 
the  commodities  or  in  the  monej-material,  or  in  both, 
the  object  of  attention  being  not  an  absolute  change  on 
either  side,  but  a  relative  change  between  the  two  sides. 
Especially  so,  if  in  measuring  the  variation  in  the 
"value"  of  money  by  means  of  prices,  they  do  not  care 
to  invoke  any  explanations  of  the  particular  changes  in 
the  prices  of  individual  commodities  singly  and  sepa- 


244  SYSTEMATIC    REVIEW 

rately,  but  deal  with  commodities  in  one  mass,  and  hold 
that  the  "values"  of  all  commodities  cannot  rise  or  fall 
together  (which  is  true  only  of  exchange- value),  and  so 
take  all  commodities  as  a  permanent  standard  of  "value." 

For  the  relativity  of  the  causes  see  passages  from  Torrens 
{Essay,  p.  56),  ScROPE  (p.  406,  etc.),  Stirling  (pp.  69-70), 
already  quoted.  Also  this  :  "Nothing  can  change  relative  value 
except  that  which  alters  relative  cost  of  production;  what  acts 
equally  on  all  commodities  will  alter  the  exchangeable  quality  of 
none,"  Bagehot,  Economic  studies,  London,  1880,  p.  203.  Cf. 
Perry  (Elements,  pp.  79,  110,  etc.) 

Against  paying  attention  to  special  causes  in  individual  com- 
modities, Jevons,  Investigations,  p.  68,  cf.  pp.  155-6;  A.  Walker, 
pp.  183-4;  J.  S.  Nicholson,  Treatise,  pp.  63,  330-1,  335-6. 

That  the  fall  of  prices  after  1873  means  appreciation  of  gold 
without  regard  to  the  causes,  Andrews,  An  honest  dollar^  revised 
ed.  pp.  5-6,  45;  Fonda,  op.  cit.  pp.  99-100;  etc.* 

From  the  fact  that  all  commodities  cannot  rise  or  fall  in  ex- 
change-value together,  the  inference  that  they  all  together  consti- 
tute the  constant  standard  of  "value"  has  been  drawn  by  Fonda, 
op.  cit.  p.  18. 

Especially  are  they  advocates  of  monej'  being  stable 
in  exchange -value  who  say  that  for  money,  as  for  any 
commodity,  to  remain  constant  in  "value"  it  has  to,  or 
ought  to,  vary  in  its  cost  of  production  proportionately 
with  the  average  change  in  the  costs  of  production  of 
commodities  in  general,  in  order  to  keep  itself  on  equal 
terms  of  exchange  with  them.  This  position  we  have 
seen  occupied  by  Mr.  Elder. 

So  ScROPE,  p.  405,  already  quoted,  and  Hertzka,  Das  Wesen 
des  Geldes,  p.  37,  already  reviewed. 

Bagehot:  "If  the  increase  in  the  productive  power  of  general 
industry  [in  the  last  thirty  years]  had  come  upon  an  age  strait- 


•So  Taussig,  op,  cit.  p.  100  with  regard  merely  to  the  term,  without 
disapproving  the  fact. 


COMPARISON  OF   THE   STANDARDS  245 

ened  as  to  money-making  industry,  the  fall  of  prices  would  have  been 
such  as  we  have  no  example  of,  and  the  effect  would  have  been 
harassing  and  confusing.  But  fortunately  the  production  of  gold 
and  silver  has  been  even  more  facilitated  than  that  of  most  other 
things.  There  has  been  no  such  confusing  fall  of  pi  ice,  as,  except 
for  the  new  discoveries  of  gold  in  California  and  Australia,  there 
would  have  been.  The  effect  of  the  productiveness  of  industry  has 
been  greatly  to  retard  and  almost  to  prevent  the  equally  confusing 
rise  of  price  which  would  otherwise  have  happened."  Op.  cit. 
p.  177. 

H.  Schmidt:  "The  fall  in  prices  is  represented  [by  W.  Fow- 
ler] to  be  a  fall  'due  to  the  ingenuity  and  enei'gy  of  men.'  No- 
body will  deny  that  those  influences  tend  to  lower  real  prices.  But 
as  they  are  universal  they  ought  to  tend  to  lower  the  [real]  prices 
of  the  precious  metals,  i.  e.,  of  money,  and  thereby  in  a  rough 
manner,  reestablish  the  equilibrium  by  restoring  the  old  level  of 
prices."  The  silver  question  in  its  social  aspect,  London,  1886,  pp. 
41-2,  ef .  p.  9. 

C.  Hecht:  "The  ideal  of  a  universal  equivalent- commodity 
is  such  a  one  the  value  of  which  depends  upon  variations  in  the 
productivity  of  human  labor  in  nearest  possible  equality  with  the 
average  of  the  other  commodities."  Anti- Bamberger ,  Berlin,  1894, 
p.  42,  cf.  pp.  35,  43,  48-9,  51. 

Over  against  those  who  prefer  gold  to  silver  for 
standard  money  on  account  of  the  production  of  the 
former  being  by  unskilled  and  hai'dly  improvable  labor 
and  the  production  of  the  latter  being  improvable  in  the 
same  manner  as  other  mechanical  and  chemical  indus- 
tries, there  seem  to  be  few  who  have  recommended  silver 
for  this  very  reason,  viz.  that  its  cost  of  production  is 
likely  to  be  cheapened  more  in  keeping  with  the  cheapen- 
ing of  commodities  in  general  and  thereby  preserve 
more  stable  its  exchange-value.  This  position  has 
probably  been  overlooked  because  it  has  been  much 
easier  to  argue  for  the  greater  stability  of  silver  on  the 
ground  that  it  is  produced  in  a  regular  industry,  while 


246  SYSTEMATIC    REVIEW 

the  production  of  gold  is  intermittent,  its  deposits  being 
discovered  at  irregular  intervals  and  quickly  exhausted. 

This  argument,  e.  g.  by  R.  H.  Walsh,  pp.  90-1 ;  J.  B.  Dumas, 
in  Proceedings  of  the  International  Monetary  Conference  held 
in  Paris  April-July  1881,  Cincinnati,  1881,  pp.  458-9;  E.  de 
Laveleye,  in  the  Compte  Rendu  du  Congres  mon^taire  inter- 
national tenu  a  Paris  Sept.  1889,  Paris,  1890,  p.  174. 

§2.  (2).  Attitude  toward  abundance.  (A.)  Those 
economists  are  dealing  with  "value"  in  the  sense  either 
of  cost -value  or  of  esteem -value  (principally  the  latter) 
and  want  money  to  be  stable  in  such  value,  who,  as  in 
the  preceding  division,  upon  a  change  in  the  general 
level  of  prices,  will  not  allow  a  change  in  the  "value" 
of  money  unless  it  can  be  proved  that  the  cause  of  the 
price -movement  lies  on  the  side  of  the  money  wholly 
or  partly,  and  not,  or  not  altogether,  on  the  side  of 
the  commodities,  and  who  now  seek  for  the  cause, 
not  in  the  cost  of  production  of  the  money -material 
or  of  the  commodities,  but  in  the  quantities  of  the 
money -material  or  of  the  goods  produced,  and  who 
can  thereby  explain,  or  explain  away,  the  changes 
in  prices  separately  or  collectively.  These  econo- 
mists want  the  supply  of  money  to  be  relatively 
constant  with  the  demand  for  it  in  the  sense  of  de- 
sire; and  while  commodities  in  general,  say,  may  be 
increasing  in  supply  not  only  absolutely  but  in  com- 
parison with  the  increase  of  population,  and  therefore 
outrunning  the  demand  or  desire  for  them,  and  losing 
some  of  their  final  utility,  thus  diminishing  in  esteem- 
value  (as  well  as  in  cost-value  because  of  greater  facility 
of  production),  want  money  to  stand  apart  from  this 
coui'se  and  to  retain  not  merely  the  same  difficulty  of 
production  or  acquisition  as  before,  but  the  same  rela- 


COMPARISON   OF   THE   STANDARDS  247 

tionship  to  our  desire  —  the  same  final  utility  —  the 
same  esteem -value.  lu  accordance  with  this  view  the 
falls  in  the  esteem -values  of  the  commodities  should  be 
marked  by  corresponding  falls  in  their  prices,  and  the 
greater  and  moi-e  widespread  these  falls,  the  better. 
Thus  the  general  fall  in  prices  which  set  in  with  the 
introduction  of  the  single  gold  standard  is  approved  by 
these  economists  on  the  ground  that  it  has  followed, 
with  sufficient  closeness,  the  falls  in  the  esteem -values 
of  goods  due  to  the  enormous  increase  in  their  produc- 
tion (itself  due  to  the  falls  in  their  cost -values) ;  where- 
fore the  position  of  money  (gold)  has  remained  steady 
in  "value,"  and  the  quantity  or  supply  has  been  great 
enough,  not  to  keep  up  prices,  but  to  keep  up  the 
"value"  of  money,  and  consequently,  in  their  opinion, 
there  has  been  no  scarcity  of  money.  They  frequently 
attempt  to  back  up  this  claim  by  appealing  to  such  facts 
as  the  low  rate  of  interest,  plethora  of  loanable  funds, 
and  large  cash  reserves  on  the  one  side,  and  on  the  other 
to  the  great  actual  increase  in  the  production  of  gold 
and  extension  of  credit  substitutes  for  metallic  currency, 
as  also  to  the  condition  of  stationary  or  even  rising 
wages;  all  which  facts,  except  the  last,  are  supereroga- 
torj',  if  their  desire  for  money  stable  in  such  value  be 
the  just  one,  and  if  the  fact  of  gold  having  been  stable 
in  such  value  can  be  proved,  which  must  be  done  in 
some  other  way.*    Another  argument  in  accord  with  this 


*  These  additional  arguments  are  often  advanced  to  prove  simply 
that  the  general  fall  of  prices  cannot  have  been  caused  by  an  insuf- 
ficiency of  gold  (or  of  credit  substitutes)  (e.  g.  by  Farrer,  pp.  60.  100, 
128,  133,  141,  and  Laughlin,  Facts  about  money,  pp.  227-8,  230,  243). 
In  this  bare  shape  they  are  absurd,  because  here  the  term  "insufficiency" 
(or  its  kindred)  can  only  refer  to  insufficiency  to  keep  up  prices,  and  so 
they  are  belied  by  the  fact  that  prices  have  fallen.     The  real  meaning  of 


248  SYSTEMATIC    REVIEW 

jiosition  is  that  the  fall  of  prices  has  been  due,  not  to 
undersupply  of  gold,  but  to  oversupply,  or  overproduc- 
tion, of  commodities;  which,  however,  is  injudicious, 
since  it  seems  to  put  blame  upon  the  producers  of  com- 
modities, as  if  they  could,  all  of  them,  overdo  the  busi- 
ness of  producing  useful  goods,  and  suggests  for  correc- 


those  who  use  these  arguments  is  as  above  construed  —  that  the  fall  of 
prices  has  not  been  caused  by  an  insufficiency  of  gold  (or  credit)  to  Iseep 
up  the  esteem-value  (or  cost-value)  of  gold.  But  even  in  this  form  these 
arguments  (except  the  last,  which  is  incomplete),  are  failures.  For  the 
first  set  is  of  facts  which  cannot  be  proved  to  be  necessarily  connected 
with  money  stable  in  esteem-value  (or  cost-value),  and  only  with  money 
so  behaving,  even  in  a  period  of  progress.  And  the  second  set  is  of 
facts  which  are  only  relative  to  the  fact  sought  to  be  proved.  Thus,  on 
the  assumption  that  monej-  is  wanted  to  be  stable  in  esteem-value,  if 
money  has  been  steady  in  esteem-value,  the  great  production  of  gold 
and  extension  of  credit  has  been  sufficient;  if  money  has  risen  in  this 
value,  these  factors,  however  great  they  may  be  shown  to  be  (even  in 
comparison  with  the  increase  shown  in  other  industries),  have  not  been 
sufficient;  and  i7  money  has  fallen  in  this  value,  these  factors  have  been 
too  great;  while  again,  on  the  assumption  that  money  is  wanted  to  be 
stable  in  some  other  kind  of  value,  the  sufficiency  or  insufficiency  of 
these  factors  must  be  determined  by  the  result,  not  the  result  by  them. 
As  for  the  last  argument,  this  of  course  is  valid  only  to  show  that 
money  has  not  risen  in  esteem-value.  Thus  when,  e.  g.,  Mayo-Smith 
says:  "If  the  fall  in  prices  is  due  to  a  scarcity  of  money,  it  would  seem 
as  if  wages  should  have  fallen  also,"  Political  Science  Quarterlj',  June 
1900,  p.  209,  he  cannot  mean  there  is  sufficiency  of  money  to  keep  up 
prices,  since  prices  have  fallen,  and  he  must  mean  there  is  sufficiencj'  to 
keep  up  wages,  as  wages  have  not  fallen,  the  only  real  meaning 
additional  to  these  analytical  propositions  being  that  he  considers  the 
latter  sufficiency  the  principal  one,  that  is,  he  holds  the  wages  standard 
and  not  the  commodity  standard.  But  no  argument  is  hereby  given  to 
show  why  the  one  standard  should  be  preferred  to  the  other;  which 
argument  must  be  sought  elsewhere.  We  are  here,  however,  concerned 
only  with  finding  what  wish  in  regard  to  the  value  money  ought  to  be 
stable  in  is  entertained  by  various  economists,  with  ultimate  view  of 
reaching  some  conclusion  as  to  which  wish  is  the  proper  one.  But  if 
this  turns  out  to  be  esteem-value  (or  cost-value),  the  correct  method  of 
measuring  constancy  or  variation  in  this  value  will  call  for  more  atten- 
tion than  it  has  yet  received. 


COMPARISON   OF   THE    STANDARDS  249 

tive  reduction  in  the  production  of  goods,  which  would 
be  generally  condemned,  and  brings  on  invidious  com- 
parison with  the  corrective  of  increasing  the  supply 
of  money,  contrary  to  the  intention  of  those  who  rely 
on  this  argument. 

This  position  is  intimately  connected  with  the  attitude  toward 
cost  of  production,  since  the  increase  of  supply  (at  least  that 
which  is  relative  to  the  increase  of  population)  is  generally  con- 
nected with  decreased  cost.  Hence  the  references  used  in  the 
preceding  division  can  be  mostly  referred  to  here.  But  attention 
may  be  specially  drawn  to  the  writings  of  Farrer,  who  frequently 
contrasts  the  supply  of  gold  and  the  supply  of  goods,  and  finds  the 
cause  of  the  fall  of  prices  in  the  increase  of  the  latter,  pp.  61, 
65,  134,  250,  etc. 

The  ascription  of  lowered  prices  to  overproduction  may  be 
found  in  Hansard,  op.  cit.  p.  40,  and  in  others;  cf.  also  Hadlet, 
p.  213.  The  following  statements,  made  by  defenders  of  the 
gold  standard,  deserve  quotation,  both  taken  from  the  Wdhrungs- 
dehatte  im  Reichstag,  Feb.  ISSG,  as  published  by  the  Deutscher 
Verein  fiir  Internationale  Doppelwiihrung,  Berlin,  1886:  "The  gen- 
eral pressure  upon  the  price-level  of  all  goods  has  in  no  wise  been 
brought  about  by  the  introduction  of  the  gold  standard  in  Ger- 
many, but  the  general  fall  of  prices  is  a  consequence  of  overpro- 
duction due  to  new  inventions,  and  probably  many  years  more  will 
go  by  before  the  power  of  consumption  in  the  world  will  have 
grown  up  to  this  overproduction,  "  Woermann,  p.  24;  "So  long  as 
competition  and  the  production  in  mass  throughout  the  world  is 
not  again  brought  into  harmony  with  the  world's  consumption,  so 
long  will  this  strife  [depressing  prices]  continue,  and  it  will  not 
cease  till  production  again  begins  to  confine  itself  somewhat  more 
closely  to  consumption,"  Lohrex,  p.  60. 

Especially  manifest  is  this  position  when  it  is  denied 
that  while  the  "values"  of  commodities,  so  measured  by 
the  relation  of  their  supply  to  the  demand  or  desire  for 
them,  are  falling,  the  "value"  of  money  ought  to  fall  in 
unison  with  the  average  of  such  falls.     This  denial  we 


250  SYSTEMATIC    BE  VIEW 

have  seen  made  by  Mr.  Coste,  and  beside  him  we 
have  seen  several  economists  treat  such  a  fall  in  this 
kind  of  value  of  money  as  simply  a  fall  in  its  "value," 
"without  admitting  consideration  that  it  might  be 
stationariness  of  its  "value"  in  another  sense  of  the 
term. 

(B).  On  the  other  hand,  they  are  advocates  of  the 
stability  of  money  in  exchange -value  proper,  and  are 
users  of  the  commodity  standard,  who  explain  a  general 
change  of  prices  by  ascribing  it  to  a  relative  change  in 
the  abundance  of  money  compared  with  the  abundance 
of  commodities.  In  particular,  such  are  thej^  who 
ascribe  the  late  general  fall  of  prices  to  a  "relative 
scarcity"  of  gold,  which  means  merely  an  insufficiency 
of  gold  to  keep  up  prices,  as  desired  by  them.  In  their 
opinion  such  insufficiency  or  relative  scarcity  is  shown 
to  exist  ipso  facto  by  the  actual  fall  of  prices,  if  once 
admitted,  in  spite  of  an  increase  in  the  actual  supply  of 
gold,  and  in  spite  of  enlarged  use  of  credit  substitutes 
for  metallic  currency,  however  great  these  may  be  found 
to  have  been;  since  these  are  shown  by  the  actual  fall 
to  have  been  more  than  offset  by  some  other  factor, 
which  is  found  in  a  still  greater  increase  in  the  quantity 
of  goods  calling  for  gold  or  its  substitutes  in  exchange, 
this  increase  being  accounted  for  partly  by  augmented 
population  and  improved  and  increased  production  (in- 
cluding transportation)  of  goods,  partly  to  enlarged  use 
of  cash  payments,  and  partly  to  passings  of  several 
countries  from  the  silver  standard,  or  from  paper  cur- 
rency, to  the  single  gold  standard  and  assumption  of 
gold  currency.  ** 

For  the  general  principle  see  Scrope  and  Stirling  already 
quoted;    also    Torrens,   Sir  Robert    Peel's  Bill,    1848,    pp.    Gl-5, 


COMPARISON   OF   THE    STANDARDS  251 

Levasseur,  pp.  12-13,  and  Giffen,  Essays,  2(1  Series,  p.  38  (1885). 
See  also  Ricardo,  p.  398  near  bottom. 

During  the  period  of  falling  prices  after  1820  C.  C.  "Western 
tells  us  that  whenever  there  was  contraction  there  was  a  cry  about 
redundancy  of  goods,  himself  adding  that  the  redundancy  of  goods 
was  only  relative  to  the  reduced  quantity  of  currency,  and  that 
there  was  no  other  redundancy,  Letter  to  the  Earl  of  Liverpool  on  the 
cause  of  the  present  emharrassment,  etc.,  London,  1826,  pp.  25-6. 

That  the  fall  of  prices  after  1873  was  due  to  relative  scarcity 
of  gold  has  been  admitted  even  by  some  monometallists:  Giffen, 
Essays,  1st  Series,  pp.  330-9  (1879),  2d  Series,  p.  23  (1885),  The 
case  against  binietallism,  1895,  pp.  219,  222;  Goschen,  On  the  prob- 
able results,  etc.,  1883,  pp.  276ff. ;  W.  Scharling,  Die  jetzige  Ge- 
schdfftsstille  und  das  Gold,  Jahrbiicher  fiir  Nation. -oekon.  und 
Statistik,  1885,  p.  191  (due  to  a  disproportion,  Misverhiiltniss), 
(against  ascribing  it  to  overproduction  of  goods,  pp.  190-203,  218, 
308-9),  Der  Detailhandel,  etc.,  1886,  pp.  308-19;  A.  Sauerbeck, 
Prices  of  commodities  and  the  precious  metals.  Journal  of  the  Statis- 
tical Society,  Sept.  1886,  p.  620  (would  say  "insufficiency  of  sup- 
ply" instead  of  "scarcity").  (Some  of  these  monometallists  have 
desired  to  rectify  this  condition  by  increasing  the  supply  of  credit 
currency.) 

This,  of  course,  is  the  position  of  the  bimetallists:  e.  g.  D. 
Watney,  Evidence  before  the  Gold  and  Silver  Commission,  Second 
Report,  1888,  qq.  9474-5,  9478;  W.  H.  Houldsworth,  The  fall  in 
prices  of  commodities,  An  address  at  Bradford,  Nov.  1894,  published 
in  London,  pp.  5-10  (in  opposition  to  Shaw-Lefevre;  does  not 
recognize  any  other  meaning  of  "appreciation"  than  rise  in  ex- 
change-value); L.  L.  Price,  p.  199;  etc.,  etc.  They  sometimes 
mislead  by  omitting  the  qualifying  term  "relative"  before 
"scarcity."  (Their  desire  is  to  rectify  the  fall  of  prices  by 
increasing  the  supply  of  metallic  currency.) 

For  the  criterion  of  a  sufficient  supply  of  money  (according  to 
this  view)  see  Horton  as  already  quoted  (above,  p.  190),  and  the 
following:  Sauerbeck,  the  question  is  whether  there  is  enough  to 
carry  on  trade  at  a  certain  average  range  of  prices,  op.  cit.  p.  621  ; 
Foxwell,  "The  only  test  is  the  index  number.  If  the  index  num- 
ber continuously  falls,  then  prices  are  unstable,  and  this  is  a  sign 
that  money  is  scarce, "  in  the  Compte  Rendu  of  the  Congres 
mon^taire  international,  Paris,  1890,  p.  208. 


252  SYSTEMATIC    REVIEW 

Especially  clear  in  advocacy  of  stability  of  money  in 
exchange -value  are  they  who  declare  that  there  ought  to 
be  a  variation  in  the  relation  between  the  supply  and  the 
demand  of  money  proportionate  to  the  general  or  average 
variation  iu  the  relation  between  the  supply  and  the  de- 
mand of  commodities — that  there  ought,  for  instance, 
in  a  period  of  progress,  to  be  a  fall  in  the  esteem -value 
of  money  equal  to  the  average  fall  in  the  esteem -values 
of  commodities.  This  is  the  position  we  have  seen  held 
by  Professor  Walras. 

This  position  was  also  held  by  ScROPE  in  one  of  the  passages 
(p.  405)  quoted  from  his  work.  It  also  appears  in  the  sequel  to 
the  passage  referred  to  in  Das  Wesen  des  Geldes  (p.  37)  of 
Hertzka,  and  likewise  in  some  of  the  passages  referred  to  of 
Hecht. 

It  is,  of  course,  implied  in  the  position  of  all  who  want 
money  to  be  stable  in  exchange -value  and  who  desire  progress. 

In  this  division  of  our  subject  we  have  been  dealing 
with  the  so-called  quantity  theory  of  the  value  of 
money,  which  is  nothing  else  than  the  general  demand- 
and- supply  theory  of  value,  applied  to  money,  in  oppo- 
sition to  the  cost -of -production  theory.  Those  recent 
economists  who,  for  a  special  ulterior  purpose,  have 
sought  to  discard  and  deride  the  quantity  theory,  gen- 
rally  confining  their  refutation  to  some  extreme  and 
erroneous  form  or  forms  in  which  it  has  sometimes  been 
stated,  may  turn  back  to  the  preceding  division  and 
content  themselves  with  what  is  there  said  about  the 
relationship  between  the  cost  of  the  money  material  and 
the  costs  of-  goods.  Here  it  deserves  to  be  added  that 
the  quantity  theory  has  generally  been  interpreted  as  if 
it  had  reference,  or  application,  only  to  the  exchange- 
value  of  money.     This  is  not  correct.     It  can  apply  to 


COMPARISON   OF   THE    STANDARDS  253 

all  the  kinds  of  economic  value  (except,  of  course,  use- 
value).  Given  a  certain  condition,  whether  stationary, 
retrograding,  or  progressing,  of  the  production  and 
supply  of  commodities,  the  supply  of  money  (along  with 
the  rapidity  of  its  circulation  and  the  use  of  credit  sub- 
stitutes) will  affect  all  the  kinds  of  value  of  money,  and, 
except  in  the  stationary  condition,  the  same  supply  will 
affect  them  differently,  so  that,  also,  the  same  effect  may 
be  produced  by  varying  the  supply.  Thus  the  cost -value 
of  money  will  be  kept  steady  by  a  certain  supply  of 
money,*  its  esteem -value  by  a  certain  other  supply,  and 
its  exchange -value  by  still  another  (and  in  a  progressive 
period  larger)  supply.  In  fact,  we  have  seen  many 
economists  advocating  plans  whereby  each  of  these  kinds 
of  stability  of  value  should  be  obtained  by  regulating 
the  issues  of  paper  money  (or  the  governmentally  con- 
trolled issues  of  metallic  money) — the  far  greater  num- 
ber, however,  desiring  such  regulation  with  a  view  to 
obtaining  stability  of  money  in  exchange -value.    Essen- 


*  This  in  spite  of  assertions  that  cost-value  is  determined  by  cost  of 
production,  without  regard  to  the  quantity  supplied  or  the  quantity  de- 
manded, the  former  being  supposed  in  the  long  run  to  adapt  itself  to  the 
latter.  For  in  a  commodity  stable  in  cost-value  such  adaptation  must 
take  place  without  requiring  application  to  sources  of  different  fertility. 
This  can  be  only  in  special  cases:  (1)  where  sources  of  a  given  degree 
of  fertility  are  so  abundant  as  to  provide  the  maximum  likely  to  be  de- 
manded for  a  long  time  to  come;  (2)  where  the  more  fertile  sources  are 
so  scanty  as  not  to  provide  the  minimum  demanded.  Otherwise  the 
application  to  more  fertile  sources  must  be  compensated  by  increased 
expenses  of  extraction  or  transportation,  or  to  less  fertile  sources  by 
improvements  in  methods  of  production  and  transportation,  — and  re- 
versely. A  commodity  produced  under  such  circumstances  is  not  likely 
to  be  found;  but  a  paper  money  may  be  conceived  of  as  stable  in  cost- 
value  if  its  supply  behaved  relatively  to  the  demand  in  the  same  way  as 
would  behave  the  supply  of  a  commodity  money  stable  in  cost-value 
because  of  such  adaptation  of  its  supply  to  the  demand. 


254  SYSTEMATIC    REVIEW 

tially  similar  positions  may  be  found  in  economists  who 
recommend  only  free  or  open  coinage  of  some  metal  or 
metals,  and  therefore  abandon  all  idea  of  governmental 
regulation,  leaving  the  matter  to  nature;  for  these 
often  state  how  they  would  like  to  see  nature  perform 
this  function, — how  they  would  like  to  have  the  natu- 
ral supply  of  money  conduct  itself.  Continual  in- 
crease of  population  and  wealth,  or  advance  of  material 
civilization,  being  taken  for  granted,  it  is  a  common 
thing  to  find  economists  expressing  a  desire  that  the 
supply  of  money  should  increase  for  the  purpose  of 
keeping  steady  the  "value"  of  money  (whether  or  no 
they  allow  for  the  increase  of  other  factors  working  to 
the  same  end) .  In  some  cases  it  is  not  plain  what  kind 
of  value  they  had  in  mind,  themselves  not  being  clear 
on  the  subject;*  but  in  most  eases  it  is  plain  on  analy- 
sis which  kind  of  value  it  was.  Some  of  them  have 
desired  the  increase  to  the  proper  extent  for  keeping 
steady  the  cost -value  of  money.  Such  a  one  was 
Ricardo,  who  once  avowed  this  desire  (p.  359). 
Others  have  desired  the  increase  to  the  proper  extent 
for  keeping  steady  the  esteem -value  of  money.  Such 
are  those,  virtually,  who  think  the  supply  of  money 
sufficient  so  long  as  wages  or  earnings  do  not  fall.  But 
again,  here  also  the  large  majority  of  the  economists  dis- 
playing desire  for  increase  in  the  supply  of  money  are 
those  who  want  it  to  the  proper  extent  for  keeping 
steady  the  exchange -value  of  money,  especially  if  they 
go  beyond  and  prefer  the  supply  to  be  more  than  enough 
rather  than  less  than  enough  for  this  purpose,  even  in 
a  period  of  progress.     Among  these  may  be  cited  — 


* E.  g.  Bordet,  op.  cit.  p.  44;   Bonnet,  Eludes,  p.  49. 


COMPARISON   OF   THE   STANDARDS  255 

Fawcett,  pp.  3GG,  389-70,  409-10;  Cernuschi,  Mecanique  de 
Ve'change,  Paris,  1866,  pp.  139  40;  Bagehot,  The  depreciation  of 
silver,  London,  1877,  p.  61  ;  W.  Newmarch,  On  the  progress  of  the 
foreign  trade  of  the  United  Kingdom  from  1856  to  1877,  a  paper  read 
before  the  Statistical  Society,  May  1878  ("the  world  ought  to  re- 
joice if  a  new  gold-field  could  be  discovered  every  few  years"); 
GoscHEN,  op.  cit.  p.  281;  Giffen,  Essays,  2d  Series,  pp.  53,  84  5; 
ScHARLiNG,  Die  jetzige  Geschiifftsstille,  etc.,  p.  298,  cf.  p.  307; 
Arendt,  op.  cit.  p.  39;  Marshall,  Remedies,  etc.,  p.  359;  Lave- 
LEYE,  Lavwnnaie,  etc.,  p.  11;  E.  SuESS,  Die  Zukunft  des  Silbers, 
Vienna  and  Leipzig,  1892,  p.  113,  Verhandlungen  der  deutschen 
Silberkommission,  17-20  Sitzung,  p.  71;  Sherwood,  pp.  97,  225; 
R.  T.  Ely,  Outlines  of  economics,  New  York,  1893,  p.  152;  Beeton, 
op.  cit.  pp.  30-1;  W.  Fisher  in  Supplement  to  Economic  Studies, 
Vol.  I.  No.  1,  (American  Economic  Association),  p.  63;  A.  J. 
Warner,  ihid.  p.  71;  E.  Babelon,  Les  origines  de  la  monnaie, 
Paris,  1897,  p.  249  (cf.  pp.  245-6;  he  rejects  the  labor  standard, 
pp.  234-6). 

It  may  be  noticed  that  this  desire  about  the  conduct  of  me- 
tallic money  has  reference  principally  to  the  course  of  the  value  of 
money  over  long  periods.  For  short  periods,  to  prevent  or  reduce 
fluctuations,  reliance  is  sometimes  put  upon  a  correctly  regulated 
issuance  of  credit  currency: — e.g.  "By  a  due  regulation  of  its 
issue,  the  measure  of  value  in  any  country  can  be  kept  more 
steady  in  value  than  if  the  currency  were  solely  based  upon  the 
precious  metals,"  R.  H.  Patterson,  The  economy  of  capital,  or 
gold  and  trade,  Edinburgh  and  London,  1865,  p.  446  (by  "value" 
he  means  exchange- value,  see  pp.  44-8,  etc.).  Cf.  also  Ricardo, 
pp.  397,  399.*  To  insure  perpetual  constancy  of  money  in  ex- 
change-value, Walras  has  further  recommended  passing  and 
repassing,  when  necessary,  between  four  different  systems  of  me- 
tallic money  (silver,  bimetallism,  limping  bimetallism,  gold),  in 
what  he  calls  a  "monetary  quadriga,"  Elements,  2d  ed.  pp.  482-4> 
Etudes,  pp.  148-51.     This  might  be  extended  to  include  govern - 


*0n  the  other  hand  compare  this:  "To  suppose  that  the  banks  can 
so  regulate  their  issues  as  to  maintain  permanent  prices,  is  to  ascribe  to 
them  a  power  which  they  do  not  possess,  and  which,  if  they  did  possess, 
they  ought  never  to  use,"  J.  W.  Gilbakt,  The  history  and  principles  of 
hanking,  London,  1834,  p.  142. 


256  SYSTEMATIC    REVIEW 

mentally  re{j:ulated   money,   and   inconvertible   paper   money    (or 
redeemable  in  alterable  quantities  of  metal). 

§3.  II.  (3).  Attitude  toward  contracts.  In  regard 
to  loans  and  contracts  in  general  a  principle  universally 
agreed  upon  is  that  what  is  borrowed  should  be  repaid, 
what  is  promised  should  be  fulfilled.  The  question, 
then,  is:  What  is  the  real  substance  in  a  loan  or  a  con- 
tract !  In  most  loans  and  contracts  certain  sums  of 
money  pass  and  are  called  for.  The  same  sum  must 
therefore  be  paid.  Now  the  old-time  adherents  of  the 
extrinsic -value  theory  of  money  maintained  that  when 
the  same  number  of  denominations  is  paid  as  called  for, 
the  debt  is  satisfied.  These  are  at  sea  in  the  giving  of 
advice  to  government,  if  government  contemplates  a 
change  in  any  feature  of  its  monetary  system ;  for  they 
have  no  definite  conception  about  any  other  fixity  in  a 
sum  of  money.  Opposed  to  these  are  the  adherents, 
now  most  influential,  of  the  intrinsic -value  theory  of 
money,  who  hold  that  the  substantial  thing  in  a  sum 
of  money  is  the  quantity  or  weight  of  precious  metal  it 
contains,  and  who  thence  conclude  that  if  an  alteration 
in  this  takes  place  between  the  contraction  and  the  solu- 
tion of  a  debt,  the  sum  of  denominations  should  be 
changed  so  as  to  retain  unchanged  the  quantity  of 
metal.  These  likewise  do  not  pay  attention  to  other 
kinds  of  value  in  which  money  may  in  the  meanwhile 
vary;  or  at  least  they  would  have  no  attention  paid  to 
it  in  ordinary  practice.  In  theory,  however,  they  allow 
that  we  may  consider  in  what  other  kind  of  value  —  in 
what  kind  of  economic  value  —  the  fixed  quantity  of 
metal  would  best  remain  stable:  and  this  is  the  question 
before  us. 

For  in  a  loan  or  other  contract,  although  a  fixed  sum 


COMPARISON   OF   TEE    STANDARDS  257 

of  denominations  or  a  fixed  weight  of  precious  metal  is 
the  thing  named  in  the  bond,  j-et  it  is  not  this  which 
either  the  debtor  or  creditor  is  principally  concerned 
with.  Money  is  primarily  a  medium  of  exchange,  and 
that  in  which  we  are  all  principally  interested  in  the 
money  we  possess,  borrow,  or  contract  for,  is  what  else 
we  can  get  with  it  in  exchange.  This  has  led  econ- 
omists to  compare  money  with  a  ticket  or  token 
entitling  the  bearer  to  a  certain  article  surrendered  or 
to  its  equivalent,  or  with  a  bill  of  exchange  upon  society 
at  large  for  future  payment  for  something  given  up  to  a 
member  of  society.  A  holder  of  money,  unless  he  has 
received  it  as  a  gift  or  has  stolen  it,  has  got  it  in  return 
for  something  he  has  given  for  it,  and  it  transmits  to 
him  the  power  of  getting  something  else  in  return  for  it 
whenever  he  later  pleases.  Thus  money  itself,  even  the 
metallic,  represents  a  debt,  and  even  in  paying  a  debt 
merely  passes  on  another  claim  for  paj'^ment.  Now,  this 
power,  or  claim,  or  right  is  value.  The  questions,  then, 
in  what  kind  of  value  debts  should  be  paid,  and  in  what 
kind  of  value  money  should  be  stable,  reduce  to  one  and 
the  same.  And  this  fundamental  question  is:  What 
kind  of  thing  is  it  to  which  a  right  is  conveyed  in  a  debt 
and  incorporated  in  a  sum  of  money,  which  therefore 
ought  to  be  restored  unchanged  in  the  quittance  of  the 
right,  and  in  regard  to  which  money  should  remain 
stable? 

Apart  from  assertions  frequently  made  that  money 
is  a  pledge  entitling  the  bearer  to  the  return  of  as  much 
value  as  he  gave,  which  are  ambiguous,  the  above  ques- 
tion is  answered  in  two  distinct  ways,  and  in  a  third, 
which  is  a  combination  of  the  two.  The  things  which 
money  represents   and   the   right   to   which   money   is 


258  SYSTEMATIC    REVIEW 

intended  to  convey  are  said  to  be  sometimes  (1)  com- 
modities, sometimes  (2)  labor,  and  sometimes  (3)  a 
combination  of  these.  And  here  also  we  get  again  all 
the  confusion  we  have  already  waded  through;  for 
economists  do  not  abide  by  their  own  statements. 
However  this  be,  we  find  the  first  of  these  answers 
given  by  the  following  economists:  — 

Boisguillebert:  Silver  turned  into  money  is  of  no  use  ex- 
cept as  guaranty  that'  the  seller  of  a  commodity  shall  get  as  much 
as  if  he  bad  bartered  it  directly.  Factum  de  la  France,  1707,  eh. 
iv. ;  money  is  a  receipt  given  by  one  who  receives  goods,  with 
guaranty.  Dissertation  sur  la  nature  des  richesses,  eh.  ii. 

Fleetwood:  "Money  is  of  no  other  use,  than  as  it  is  the 
thing  with  which  we  purchase  the  necessaries  and  conveniencies  of 
life."     Chronicon preciosum,  1707  (2d  ed.  1745,  pp.  48-9). 

Adam  Smith:  "A  guinea  may  be  considered  as  a  bill  for  a 
certain  quantity  of  necessaries  and  conveniencies  upon  all  the 
tradesmen  in  the  neighborhood."  P.  126a  (cf.  also  p.  156a  and  b, 
and  G.  Garnier's  comment  in  Vol.  V.  pp.  428-9 of  his  translation). 

H.  Thornton:  "Money  of  every  kind  is  an  order  for  goods." 
Enquiry  into  the  nature  and  effect  of  the  paper  credit  of  Great 
Britain,  London,  1802,  p.  260. 

J.  S.  Mill:  Pounds  and  shillings  are  "a  sort  of  tickets  or 
orders,"  payable  at  any  shop.     Vol.  II,  p.  9. 

Beeton:  "What  is  it  that  the  borrower  of  a  certain  sum  of 
money  in  fact  receives?  Is  it  not  the  purchasing  power  which  the 
money  gives  him  over  things  in  general,  which  he  can  exercise  as 
he  pleases;  and  it  is  obviously  this  same  purchasing  power  which 
he  should  restore  to  the  lender  to  be  exercised  by  him  in  turn  as 
he  pleases.  .  .  .  As  Professor  Smart  has  recently  phrased  it: 
'  The  only  proper  repayment  of  money  is  a  repayment  such  as  will 
put  the  creditor  back  into  the  same  relative  position  to  all  other 
commodities  as  when  ho  lent  the  money.'  "     Op.  cit.  pp.  17-18. 

Laughlin:  "We  know  it  [money]  is  only  a  medium  for  get- 
ting from  goods  to  other  goods."  "When  a  man  borrows  $1,000 
he  borrows  a  claim  on  goods  in  general,  and  the  money  is  only  a 
go-between."    Facts  ahout  money ,  pp.  80,  152. 


COMPARISON   OF  THE   STANDARDS  259 

The  second  is  given  in  various  unprecise  statements, 
as  follows:  — 

Berkeley:  "Whether  power  to  command  the  industry  of 
others  be  not  real  wealth?  And  whether  money  be  not  in  truth, 
tickets  or  tokens  for  conveying  and  recording  such  power,  and 
whether  it  be  of  great  consequence  what  materials  the  tickets  are 
made  of?"     The  querist,  1735,  q.  35. 

Galiani  :  "  Coins  are  tickets  which  ultimately  are  a  representa- 
tion of  the  credit  one  has  upon  society  by  reason  of  labors  (fatidie) 
for  it  sustained  either  by  the  bearer  himself  or  by  others  who  have 
given  it  to  him."  Delia  nioneta,  1750  (ed.  Custodi,  Vol.  I.  pp. 
148-9). 

Kant:  "Money  is  the  generally  used  means  of  trafficking  the 
industry  {Fleiss)  of  men  with  one  another. "  Die  Metaphysik  der 
Sitten,  1797  (Hartenstein's  ed.,  Vol.  VII.  p.  86). 

Bastiat:  a  piece  of  money  testifies  to  a  service  rendered,  for 
which  equivalent  satisfaction  has  not  yet  been  taken,  and  virtually 
bears  the  inscription:  "Pay  to  the  bearer  a  service  equivalent  to 
the  service  he  has  rendered  to  society,  "  etc.  Oeuvres,  Vol.  V.  pp. 
80-81,  similarly  Vol.  VI.  pp.  25,  209. 

M.  A.  Miller:  Money  "only  represents  labor."  Op. 
at.  p.  89. 

Whittick :  "  The  dollar  represents  a  certain  difficulty  of  attain- 
ment. "     Op.  cit.  p.  81,  cf.  p.  80. 

Hadley  :  "  The  debtor  was  not  borrowing  a  certain  amount  of 
comfort  from  the  creditor.  He  was  borrowing  a  certain  amount 
of  control  of  labor.  "     P.  213. 

The  third  is  not  so  frequently  stated,  but  is  found  in 
the  following:  — 

J.  Garnier:  Money  "functions  as  an  assignation  or  a  ion 
giving  the  bearer  right  to  procure  directly  all  products  and 
services.  "     §  420. 

Macleod:  "Currency  does  not  represent  commodities,  but  an 
abstract  right  or  power  of  demanding  services  in  general,  which 
may  or  may  not  be  commodities."  Elements,  p.  39.  "The  true 
nature  of  money  is  now  apparent.  It  is  simply  a  right,  or  title,  to 
demand  some  product  or  service  from  some  one  else."      Theory  of 


260  SySTEMATIC    REVIEW 

credit,  p.  75.  (Cf.  also  this:  "When  the  laborer  has  received  his 
wages  in  money,  he  has  not  received  an  equivalent  for  his  labor, 
but  only  something  which  will  enable  him  to  get  what  he  requires, 
or  chooses.  The  money,  therefore,  that  he  possesses  is  not  the 
equivalent,  but  it  is  the  symbol  or  proof  that  he  has  rendered  ser- 
vices for  which  he  has  not  yet  received  an  equivalent.  "  Elements, 
pp.  65-6.) 

Although,  as  we  have  seen,  the  makers  of  the  first 
set  of  statements  have  not  always  abided  by  the  logical 
conclusion  therefrom,  yet  none  the  less  the  logical 
conclusion  is  that  if  money  is  intended  to  keep  the 
holder  of  it  in  the  same  position  toward  commodities 
and  comforts  money  should  be  stable  in  exchange -value 
proper.  From  the  second  statement,  that  money  is  to 
restore  the  same  command  over  labor  and  industry,  it 
does  not  necessarily  follow,  as  we  have  seen,  that  money 
should  be  stable  in  labor- value.  Yet  the  supporters  of 
this  doctrine  of  labor-value  ought  logically  to  rest  it 
upon  the  opinion  that  money  is  an  intermediary,  not 
between  goods  and  goods,  but  between  labor  and  labor 
—  with  the  addition,  generally  suppressed,  that  no 
allowance  is  to  be  made  for  improvement  in  labor. 
Similarly,  those  who  maintain  that  money  should  keep 
the  holder  in  the  same  situation  relatively  to  goods  and 
labor,  ought  to  state  the  proposition  about  the  nature 
ofmoney  in  the  third  form. 

Now,  in  a  stationary  period  it  is  indifferent  which,  of 
these  answers  is  made,  since  they  all  coincide  in  such  a 
period.  But  in  a  period  of  progress  such  as  the  world 
has  enjoyed  almost  continuously  for  several  centuries, 
the  first  two  answers  divergCj  leaving  room  in  between 
them  for  the  third.  For  in  a  period  of  progress  a  cer- 
tain amount  of  commodities  may  be  produced  with  less 
labor,  and  a  certain  amount  of  labor  may  produce  more 


COMPARISON   OF   THE    STANDARDS  261 

commodities,  at  the  end  than  at  the  begining  of  a  loan. 
Thei'efore  (i)  if  the  loan  is  repaid  in  the  same  amount 
of  commodities  (in  money  with  the  same  purchasing 
power,  the  same  exchange- value),  the  debtor  gets  all 
the  advantage  of  the  lessened  labor,^  or  if  he  works  as 
much  as  before,  he  gets  all  the  increase  of  product,  while 
the  creditor  is  no  better  off,  as  regards  the  return  of 
his  loan,  than  if  there  had  been  no  progress.  If  (2)  the 
loan  is  repaid  in  the  same  amount  of  labor  (in  money 
with  the  same  command  over  labor,  the  same  labor- 
value,  the  amount  of  labor,  improved  in  efficiency,  being 
measured  by  the  hour) ,  the  creditor  gets  all  the  advan- 
tage of  the  increased  commodities,  while  the  debtor  is  in 
nowise  aided,  as  regards  his  repayment,  by  the  progress. 
Thus,  to  conceive  of  a  debt  as  calling  for  payment  in 
commodities,  is  to  conceive  of  a  condition  which,  as  re- 
gards the  borrowing  of  money,  is,  in  a  period  of  prog- 
ress, wholly  in  favor  of  the  debtor;  and  to  conceive  of 
a  debt  as  calling  for  payment  in  labor,  is  to  conceive  of 
a  condition  which,  as  regards  the  lending  of  money,  is, 
in  a  period  of  progress,  wholly  in  favor  of  the  creditor. 
The  first  of  these  conceptions  then  induces,  or  is  in- 
duced by,  a  frame  of  mind  favorable  to  giving  all  the 
benefits  of  progress,  upon  their  borrowings,  to  the 
debtors;  and  the  second  induces,  or  is  induced  by,  a 
frame  of  mind  favorable  to  giving  all  the  benefits  of 
progress,  upon  their  lendings,  to  the  creditors. 
Between  these  opposing  views  there  is  (3)  another, 
combining  them,  which  recommends  a  division  of  the 
benefits  of  progress,  in  the  matter  of  loans,  between 
the  debtors  and  the  creditors,  presumably  equally. 
This  induces,  or  is  induced  by,  a  frame  of  mind  impar- 
tially desirous  of  letting  both  these  parties  share  in  the 


262  SYSTEMATIC    BE  VIEW 

benefits  of  progress  applied  to  tlieir  loaus.  We  have, 
then,  these  three  concatenations  of  ideas:  (1)  The 
standard  of  deferred  payments  is  the  commodity  stand- 
ard— money  should  be  stable  in  exchange -value — the 
benefits  of  progress  upon  loans  should  all  go  to  the 
debtors;  (2)  The  standard  of  deferred  payments  is  the 
labor  standard — money  should  be  stable  in  cost -value  or 
esteem- value  —  the  benefits  of  progress,  upon  loans, 
should  all  go  to  the  creditors;  (3)  The  standard  of 
deferred  payments  is  the  commodity -and -labor  standard 
— money  should  vary,  in  a  period  of  progress,  by  rising 
in  exchange-value  and  falling  in  cost-value  or  esteem- 
value — the  benefits  of  progress,  upon  loans,  should  be 
shared  between  the  debtors  and  creditors.* 

On  account  of  the  third  item  in  each  of  these  posi- 
tions_  it  is  possible  to  argue  for  them  by  assigning 
reasons  (1)  why  debtors  alone  should  reap  all  the  bene- 
fits of  progress  upon  their  borrowings,  (2)  why  creditors 
alone  should  get  all  these  benefits  upon  their  lend  in  gs, 
(3)  why  the  two  parties  to  a  loan  should  share  the  bene- 
fits between  them.  Here,  in  fact,  we  have  the  main 
line  of  argument  by  which  a  settlement  may  be  reached. 
To  argue,  as  some  of  the  older  economists  did,  that 
debts  should  be  paid  in  the  second  way  because  in  debts 
the  value  to  be  restored  intact  is  naturally  real  value, 
and  real  value  is  labor -value  (or  in  the  third  way,  be- 
cause real  value  is  purchasing  power  over  commodities 
and  labor),  is  Jo  make  a  petitio  principii^  since  the  very 
question  at  issue  is  as  to  which  kind  of  value  is  the  real 

*In  a  period  of  retrogression  the  disadvantages  of  decay  would  in 
the  first  position  wholly  affect  the  debtors,  and  in  the  second  wholly 
affect  the  creditors,  the  interests  of  these  parties  being  inverted.  In  the 
third  the  variations  of  money  would  be  reversed.  But  we  are  hardly 
concerned  with  such  a  period. 


COMPARISON    OF   THE    STANDARDS  263 

value  tliat  passes  in  loans  and  is  stored  in  money.  Also 
to  conceive  of  real  value  as  command  over  labor  measured 
b^Ume  is  to  adopt  only  one  of  two  ways  of  referring 
real  value  to  labor,  since  labor  is  measurable  also  by 
efficiency;  and  alihougli  that  way,  in  two  branches,  may 
be  the  proper  way  of  relating  to  labor  esteem -value  and 
cost- value,  it  is  not  the  proper  way  of  relating  to  labor 
exchange-value,  and  the  question  remains  which  of  these 
relations  to  labor  is  the  proper  one  for  the  purpose  of 
regulating  the  repayment  of  loans  —  a  consideration 
never  entered  upon  by  the  old  economists.  Therefore  to 
argue  for  this  position  by  appealing  to  the  authority  of 
those  old  economists,  praised  by  calling  them  the 
"classic  economists,"^  is  to  rest  upon  slender  support, 
especially  if  no  account  is  taken  of  their  division  into 
two  sects,  each  adopting  a  different  way  of  connecting 
real  value  with  labor  measured  by  time  (the  one  being 
for  esteem-value,  the  other  for  cost- value).  Let  us 
then  briefly  review  the  arguments  offered  from  the  point 
of  view  of  distribution  of  the  benefits  of  progress. 

These  arguments  have  been  debated  at  various  times, 
when  the  subject  became  pressing.  Of  late  they  have 
been  bandied  between  the  bimetallists  and  monometal- 
lists,  the  former  taking  the  first  position,  and  the  latter 
the  second,  although  these,  by  their  arguments,  as  we 
shall  see,  are  justified  only  to  the  extent  of  adopting  the 
third.  The  argument  for  the  first  position  is  that, 
although  some  debtors  are  spendthrifts,  the  greater 
number,  especially  in  the  modern  industrial  state,  are 
undertakers  of  productive  enterprises,  and  that  therefore 
it  is   but  justice  that  the  increase  accruing  from  im- 

*As  done,  for  instance,  by  Taussig,  who  appeals  also  to  the  social- 
ists, op.  cit.  p.  107. 


264  SYSTEMATIC    REVIEW 

l^rovement  in  their  labor,  or  from  their  management  of 
the  labor  of  others,  should  all  go  to  themselves  (or  to 
themselves  and  their  laborers);*  while,  on  the  other 
hand,  the  creditors,  giia  creditors,  are  inactive,  and  so 
have  no  just  claim,  beyond  the  interest  contracted  for, 
to  receive  back  a  greater  purchasing  power  over  the 
comforts  and  conveniences  of  life  than  they  parted  with. 
This  we  have  seen,  for  instance,  to  be  the  position  of 
Scrope,  in  an  earlier  period  of  falling  prices;  and  it  may 
be  found  maintained  by  many  of  the  present-day  bi- 
metallists.t  And  when  it  is  objected  that  inventors  of 
improved  methods  of  production  may  be  third  parties, 
it  is  replied  that  it  is  the  borrowing  undertakers  of 
industry  who  apply  the  inventions,  and  also  that  it  is 
the  borrowing  investors  in  present  machinery  who  run 
the  risk  of  loss  through  the  future  invention  of  better 
machinery,  while  the  creditors  guard  themselves  against 
this  contingency  by  a  considerable  margin  in  the  security 
they  demand,  so  that  it  is  but  just  that  he  who  assumes 
the  risk  of  loss  should  be  the  one  to  profit  in  case  of 
success. t  Or  again,  even  admitting  the  benefits  of 
progress  to  be  an  unearned  increment,  it  is  urged  that  it 
is  more  advantageous  for  society  at  large  that  this 
should  go  to  the  borrowing  producers,  as  these  are  the 
parties  the  more  likely  to  turn  it  to  productive 
purposes.il 


*  The  distribution  between  these  active  parties  in  production  is  the 
subject  of  the  next  division. 

t-57.  g.  W.  H.  Smith,  op.  cit.  p.  91,  and  J.  H.  Gray  in  Supplement  to 
Economic  Studies,  American  Economic  Association,  April  1896,  p.  88. 

XE.  g.  by  J.  A.  Smith,  op.  cit.  pp.  54-5,  and  Shiblky,  op.  cit.  pp. 
38-42. 

11^.  g.  by  H.  H.  Powers  in  the  Supplement  to  Economic  Studies 
above  cited,  pp.  72-3. 


COMPARISON   OF   THE   STANDARDS  265 

On  the  opposite  side,  supporters  of  tlie  labor  stand- 
ard have  urged,  in  the  words  of  Bailej',  that  the  creditor 
has  a  right  to  "partake  in  the  advantages  derived  by  the 
community  at  large  from  improvements  in  production, 
of  which  his  capital  is  in  truth  one  of  the  instruments,"* 
And  we  have  seen  Mr.  Pollard  even  treat  the  subject  as 
if  the  creditors  contributed  as  much  as  the  debtors 
toward  the  improvements,  wherefore  they,  too,  are  en- 
titled to  a  "growing  share"  of  the  good  things  of  life, 
during  a  period  of  growing  general  prosperity. t  Or 
sometimes  the  mere  bald  assertion  is  made,  like  the  fol- 
lowing by  Mr.  H.  White,  that  "bondholders  are  entitled 
to  share  with  others  the  advantages  of  low  prices  of 
manufactured  goods  resulting  from  new  inventions  and 
facilities  for  production  and  transportation."! 

It  is  curious  that  these  economists  do  not  see  that 
this  talk  about  sharing  the  benefits  is  an  argument  only 
for  the  third  position,  and  not  for  the  second — not  for 
the  labor  standard  alone,  in  either  of  its  forms  —  in 
support  of  which  it  is  generally  advanced.  The  idea 
seems  to  be  that  when  money  remains  constant  in 
esteem -value  and  prices  fall  to  the  full  extent  of  the 
improvements  made  in  production,  the  debtors  get  ad- 
vantage from  these  improvements  on  all  investments  of 
their  own  capital  and  from  the  greater  efficiency  of  their 
own  unencumbered  labor,  so  that,  when  the  creditors 
get  advantage  from  their  loaned  capital,  both  the  two 
classes  are  "sharing"  in  the  general  increase  of  pros- 

*  Money  and  its  vicissitudes  in  value,  p.  121.  Exception  has  been 
taken  to  this  by  C.  W.  Mixter,  Samuel  Bailey  on  appreciation,  Quarterly 
Journal  of  Economics,  April  1898,  p.  348. 

tChapter  XVI.,  the  title  of  which  is  "The  wages-level  as  the  measur« 
of  value  eternally  just  both  to  debtors  and  creditors." 

XThe  gold  standard,  p.  33. 


266  SYSTEMATIC    REVIEW 

perity.*  The  question  should,  of  course,  be  confined  to 
the  distribution  of  the  increase  of  product  derived  from 
the  capital  loaned,  according  to  the  average  increase  at 
the  time,  and  it  should  consider  whether  this  increase  of 
product  should  all  go  to  the  debtor  or  all  to  the  creditor 
or  whether  it  should  be  shared  between  them.  To  give 
it  all  to  the  creditor,  and  then  let  the  debtor  recoup 
himself  from  his  own  capital  or  by  his  own  labor,  is  not 
to  divide  the  increase  between  the  two  parties  to  a  loan. 
These  economists  also  at  times  seem  to  interpret  the 
advocates  of  the  first  position  as  if  they  would  exclude 
the  persons  who  are  creditors  from  all  participation  in 
the  advance  of  prosperity.  This,  of  course,  is  not  done 
by  them,  since  there  is  nothing  to  prevent  creditors 
from  getting  their  share  by  investing  and  managing 
their  own  capital,  or  by  their  own  labor.  The  point 
is  that  what  is  done  either  by  the  debtor  or  by  the 
creditor  apart  from  the  capital  that  has  passed  from  the 
one  to  the  other  and  is  to  return  again,  is  beside  the 
question  at  issue.  The  question  at  issue  does  not  deal 
with  classes  of  society.  It  deals  with  parties  to  special 
business  transactions.  It  does  not  ask,  What  classes 
of  society  shall  get  the  benefits  of  progress,  in  whole 
or  in  part?  It  asks,  On  a  given  loan,  during  a  period 
of  progress,  which  party  to  this  transaction,  the  bor- 
rower who  uses  the  capital  or  the  lender  who  sells 
the  use  of  it  for  a  stipulated  sum,  shall  get  the  average 
increase  of  yield  accruing  during  the  time  of  its   use? 


*  A  good  instance  is  shown  by  Taussig,  who,  after  admitting  that  it  is 
just  for  the  creditor  to  be  paid  in  equal  sacrifice  or  labor  to  what  he 
gave,  and  therefore  with  the  whole  increase  of  the  product,  winds  up  by 
asking,  by  way  of  argument:  "And  why  should  he  not  share  with  the 
rest  of  the  community  the  benefits  of  a  general  increase  in  the  produc- 
tiveness of  labor?  "  loc.  cit. 


COMPARISON   OF   THE   STANDARDS  267 

It  Js  interesting  to  note  that  there  does  not  appear  to 
be  a  single  economist  who  has  ever  claimed  that  this 
in.crease  should  all  go  to  the  creditor.  Therefore  the 
pjire  labor  standard  remains  without  any  true  argu- 
ment for  it.  It  is,  however,  held;  but  it  is  held  on 
the  strength  of  an  argument  which  rightly  goes  only 
to  support  the  third  position  —  the  position  avowedly 
maintained  only  by  a  few  economists,  who  look  upon 
themselves  as  compromisers. 

§4.  (4).  Attitude  toward  wages,  or  incomes  in  gen- 
eral. The  undertakers  of  industry  stand  in  relationship 
both,  as  borrowers,  to  creditors,  who,  qua  creditors, 
are  wholly  passive,  and,  as  employers,  to  laborers,  who, 
qua  laborers,  are  wholly  active.  The  relationship  be- 
tween undertakers,  as  borrowers,  and  their  creditors, 
during  periods  of  progress,  has^  just  been  examined. 
If  this  be  decided  either  wholly  or  partly  in  favor  of  the 
borrowers,  to  the  effect  that  they  deserve  to  get  upon 
their  borrowings  all  or  part  of  the  increase  accruing 
from  improvements  in  the  disposition  and  management 
of  capital  and  labor,  the  fourth  and  last  question  now 
arises  whether  the  undertakers,  as  employers,  ought 
not  to  share  this  benefit  with  their  employees,  who 
contribute  to  it  by  their  improved  labor.  And  even  if 
the  undertakers  must  resign  to  their  creditors  all  the 
increase  upon  their  borrowed  capital,  the  question  may 
still  remain  whether  they  ought  not  to  share  with  their 
employees  the  increase  coming  from  their  own  capital 
and  from  their  employees'  labor. 

Here  there  is  no  doubt  at  all  as  to  such  distribution; 
the  doubt  is  only  as  to  the  manner  of  it.  All  fair- 
minded  persons  desire  that  improvements  in  production 
and  increase  in  the  abundance  of  goods  shall  redound 


268  SYSTEMATIC    REVIEW 

also  to  the  benefit  of  the  manual  producers  of  them, — 
that  not  only  the  employers,  or  profit-earners,  but  the 
employees,  or  wage-earners  (and  salary-earners)  shall 
gain  more  real  wealth.  This  isji  desire  that  the  "real 
wages  "  of  laborers,  or  the  purchasing  power  accorded 
them  over  the  necessaries  and  conveniences  of  life 
(which  in  their  case  consist  principally  of  commodities, 
since  they  rarely  employ  other  laborers),*  shall  rise 
along  with  the  increase  of  wealth  in  other  classes.  And 
unless  the  laws  of  the  State  are  oppressive  or  the  social 
conditions  rotten,  this  advance  in  real  wages  will  inevi- 
tably be  obtained  by  the  watchfulness  of  the  laborers 
themselves,  when  there  is  continued  increase  in  the  out- 
put of  their  labor.  Now,  this  advance  of  real  wages 
may  take  place  most  strikingly,  and  it  may  be  advocated 
that  it  should  take  place,  in  either  of  three  out  of  five 
typical  ways  in  which  material  progress  may  manifest 
itself.  It  takes  place:  (1)  if  the  general  level  of  prices 
remains  stable  and  the  general  level  of  wages  rises;  (2) 
if  the  general  level  of  prices  falls  and  the  general  level 
of  wages  is  stable ;t  (3)  if  the  general  level  of  prices 


*"It  is  quite  plain  that  the  real  wages  paid  by  the  capitalist  to  the 
laborer  consist  mostly  of  commodities,"  Gififeu,  Essays,  1st  Series,  p.  344. 

tHere  it  is  necessary  utterly  to  repudiate  a  statement  like  this: 
"According  to  the  strict  laws  of  economical  science,  when  the  purchasing 
power  of  gold  increases,  wages  ought  to  fall,"  Goschen,  op,  cit.  p.  287. 
Similarly  Nicholson,  Treatise,  p.  244;  Wells,  in  a  passage  previously 
quoted,  and  Carlisle,  op.  cit.  p.  ZQ;  and  of  great  or  long-continued  falls 
of  prices,  Giffen,  op.  cit.  p.  343,  and  Foxwell,  in  Report  of  the  Proceedings 
of  the  Bimetallic  League  at  Manchester,  1894,  p.  Gl.  This  is  not  neces- 
sarily true  in  a  progressive  period.  "Nominal  reduction  must  come  some- 
how," says  Giifen,  "unless  there  is  to  be  a  real  rise  of  wages,"  op.  cit.  p. 
344;  but  this  real  rise  may  take  place,  although  Giffen  here  expects  the 
nominal  reduction,  i.  e.  reduction  of  money  wages  preventive  of  the  real 
rise,  as  also  in  2cl  Series,  pp.  30  and  474.—  That  wages  must  fall  if  there 
is  "appreciation  "  of  money,  as  said  by  Leighton  and  by  Helfferich  in 


COMPARISON    OF   THE    STANDARDS  269 

falls  aud  the  general  level  of  wages  rises.*  Or  if  it  be 
assumed  that  there  is  a  fair  division  of  the  increase 
between  the  employers  and  the  employees,  or  if  this 
question  be  left  aside  and  attention  be  extended  to  the 
whole  body  of  workers  and  even  of  society,  the  term 
"earnings"  may  be  substituted  for  "wages."  Earnings 
may  represent  either  the  net  products  remaining  in  the 
hands  of  the  producers,  or  the  gross  earnings,  covering 
also  what  goes  in  rent  and  interest  to  the  passive  owners 
of  land  and  other  capital.  The  former  would  seem  to 
have  closer  connection  with  the  subject  of  cost -value 
(but  only  in  unmonopolizable  industries),  and  the  latter 
with  that  of  esteem -value.  In  each  case  concern  is  for 
the  average  or  per  capita  rate.  In  the  last  and  widesj 
sense  the  term  "income"  may  be  substituted  as  more 
precise  than  "earnings;"  and  now  the  advance  of  pros- 
perity may  show  itself  in  these  three  ways:  (1)  constant 
level  of  prices  and  rising  level  of  incomes,  (2)  falling 
level  of  prices  and  constant  level  of  incomes,  (3)  fall- 
ing level  of  prices  and  rising  level  of  incomes. t  And 
now  it  is  evident  that  a  person  who  prefers  the  first  of 
these  conditions  is  an  advocate  of  the  commodity  stand- 
ard, and  wants  money  to  be  stable  in  exchange -value 
proper;  that  a  person  who  prefers  the  second  is  an 
advocate  of  the  wages,  or  earnings,  or  income  standard, 

passap:es  previously  quoted,  is  another  kind  of  statement,  being  merely 
analytical,  as  it  depends  upon  the  meaning  of  the  term. 

♦That  improvement  in  the  condition  of  the  laborers  may  be  equally 
brought  about  in  either  of  the  last  two  ways  is  recognized  by  Nasse  in 
the  Second  Report  of  the  Gold  and  Silver  Commission,  p.  261a. 

tThe  first  and  second  were  pointed  out  by  Giffen,  Ussaj/s,  2d 
Series,  pp.  27-8,  and  by  Foxwell  at  the  Congr^s  mondtaire  inter- 
national, in  the  Compte  Rendu,  Paris,  1890,  p.  208,  and  at  the  Man- 
chester Meeting,  in  the  Report  above  cited,  p.  60.  All  three  were 
noticed  by  Taussig,  op.  cit,  p.  108. 


270  SYSTEMATIC    BE  VIEW 

and  wants  money  to  be  stable  in  labor- value  of  some 
sort  (especially  esteem  -  value ) ;  and  that  a  person  who 
prefers  the  third  is  an  advocate  of  the  commodity -and- 
wages  standard  (or  the  commodity-aud-iucome  stand- 
ard, etc.),  and  wants  money  to  vary  at  a  mean  between 
the  stable  positions  in  those  two  kinds  of  value  (or  to  be 
stable  in  the  mongrel  "exchange -value"  conceived  as 
purchasing  power  or  command  over  both  commodities 
cmd  labor).  Conversely,  also,  it  may  be  said  that  the 
first  of  these  methods  of  distribution  is  preferred  by  the 
advocates  of  the  commodity  standard,  the  second  by 
the  advocates  of  the  labor  standard,  and  the  third 
by  the  advocates  of  the  mixture  of  the  two;  for  we 
may  assume  that  everybody  wants  economic  progress, 
and  that  nobody  would  at  least  deny  that  he  wants 
the  producers,  including  laborers,  to  partake  of  its 
benefits.* 

The  first  is  the  position  properly  assumed  by  the 
bimetallists,  and  generally  entertained  by  them  even 
when  they  do  not  actually  put  it  in  this  form.  It  is 
put  in  this  form,  for  instance,  by  Professor  Fox  well, 
who  is  reported  as  saying:  "The  normal  condition  is 
steady  prices  of  commodities,  and  gradually  increasing 


*  There  are  two  other  possible  positions:  (4)  that  the  level  of  prices 
should  rise  and  the  level  of  wages  or  incomes  rise  more,  and  (5)  that  the 
level  of  prices  should  fall  and  the  level  of  wages  or  incomes  should  fall 
less.  But  in  neither  of  these  does  money  remain  stable  in  any  kind  of 
value,  nor  do  any  of  its  kinds  of  value  vary  in  opposite  directions  (so  as 
to  give  appearance  of  neutralizing  each  other),  but  they  all  vary  in  the 
same  direction.  Therefore  neither  of  these  has  ever  been  advocated, 
except  that  the  former  has  been  favored  by  those  who  prefer  "deprecia- 
tion" (in  the  sense  of  falling  in  exchange-value)  to  any  other  departure 
from  stability  in  exchange-value.  The  last  has  hardly  been  favored  by 
anyone,  although  wo  shall  presently  make  reference  to  a  few  statements 
by  economists  of  repute  looking  in  this  direction. 


COMPARISON  OF   THE   STANDARDS  271 

incomes,  both  in  money  and  in  goods."*  We  have  also 
seen  it  put  in  this  form  by  Mr.  L.  L.  Price.  It  is,  of 
course,  as  just  said,  involved  in  the  position  of  all  the 
advocates  of  the  commodity  standard,  reference  to  whom 
need  not  be  repeated. 

The  second  is  the  position  sometimes  fallen  into  by 
Adam  Smith,  Senior,  and  J.  Garnier,  and  completely 
maintained  by  Malthus,  Gray,  Shadwell,  and  Pollard, 
all  confining  it  to  stability  of  wages;  and  we  have  seen 
it  advocated  at  times  by  Lord  Farrer,  and  once  by  our 
government  in  the  person  of  the  Director  of  the  Mint. 
It  is  the  position  generally  assumed,  or  involved  in  their 
other  claims,  by  the  defenders  of  the  present  single 
gold  standard,  as  an  alternative  with  the  third.  A  few 
passages  to  this  effect  may  be  quoted:  — 

Hansard:  "It  will  be  a  distinct  advantage  if  the  present 
appreciation  caused  by  the  low  level  of  prices  continues,  and 
wages  or  incomes  remain  the  same,  as  the  bodily  comfort  of  our 
masses  will  be  added  to  materially."     Op.  cit.  p.  42. 

N.  G.  Pierson:  "Economic  progress  consists  in  a  continuous 
fall  of  prices,  while  money  incomes  remain  the  same  or  do  not 
decline  proportionately."  In  the  Second  Report  of  the  Gold  and 
Silver  Commission,  p.  254b.  (This  is  quoted  with  apparent  ap- 
proval by  Mayo- Smith,  in  the  Political  Science  Quarterly,  March 
1900,  p.  36.) 

Giffen:  "The  rise  of  real  wages  between  1850  and  1870  was 
a  good  thing,  but  it  would  have  been  better  had  it  taken  the  shape 
of  stationary  money  wages  with  fall  of  prices"  [i.e.  if  the  period 
had  been  like  the  period  since  1870],  in  the  Economic  Journal, 
Sept.  1892,  p.  469.  (But  in  1885  he  had  said  that  he  would  be 
"surer  of  the  immediate  future  if  wages  had  fallen  more  than 
they  have  done  —  if,  in  other  words,  the  adjustment  of  money 
wages  to  the  lower  prices  of  commodities  had  been  more  complete 


*In    the    Bankers'   Insurance    Managers'    and    Agents'   Magazine, 
London,  Nov.  1890,  p.  1831.     See  also  preceding  references. 


272  SYSTEMATIC    REVIEW 

in  all  directions  than  it  has  been"  {i.  e.  if  there  had  been  less  or 
no  rise  in  real  wages].  Essays,  2d  Series,  pp.  35-6.  But,  again, 
ibid.  p.  474,  he  wants  wages  to  fall  less  than  prices.) 

The  third  is  also  the  position  of  the  gold -standard 
men,  indifferently  with  the  second.  We  have  seen  it  en- 
tertained by  Professor  Leroy-Beaulieu,  as  a  great  law  of 
progress.*    A  few  more  references  may  be  appended:  — 

Chevalier,  fall  of  prices  with  rise  of  wages,  a  sign  of  progress, 
Le  simple  et  le  douile  etalon,  Revue  des  Deux  Mondes,  April  1, 
1876,  p.  579  (ef .  Monnaie,  pp.  727-8) ;  Levasseur,  in  the  Compte 
Rendu  of  the  Congres  monetaire  international,  Paris,  1890,  p.  91; 
Taussig,  op.  clt.  pp.  Ill,  125;  E.  Atkinson,  op.  cit.  p.  145;  Horr, 
this  "the  law  of  human  progress,"  in  The  great  debate,  p.  223; 
Weissinger,  op.  cit.  p.  55. 

One  or  another  of  these  methods  of  distribution  may 
be  preferred  simply  because  it  fits  in  with  the  conclusion 
reached  through  the  above -reviewed  waj's  of  envisaging 
the  subject.  But  it  would  seem  as  if  this  aspect  of  the 
general  question  might  yield  additional  argument.  It 
is,  however,  hardly  fruitful  of  such,  because  of  the  little 
difference,  when  considered  merelj'  statically,  between 
the  three  methods.  The  argumentation  along  this  line 
has  consequently  been  the  weakest  of  all.  We  have 
seen  Professor  Marshall,  in  his  Evidence  before  the  Gold 
and  Silver  Commission,  treat  the  second  method  as  good 
and  recomraendable  on  the  ground  that  it  yields  better 
real  wages  and  causes  a  more  equal  distribution  of 
wealth  than  does  a  condition  of  stable  prices.  Similarly 
the  late  Professor  Mayo -Smith  asserted  that  "the  change 
in  price   level   is  necessary  in  order  to  distribute  the 


*But  he  had  once  thought  that  a  reduction  of  wages  might  be  neces- 
sary, speaking  of  them  as  being  excessively  high,  La  baisse  des  prix  et 
ta  crise  commerciale,  Revue  des  Deux  Mondes,  May  15,  1886,  p.  417. 


COMPARISON   OF   THE    STANDARDS  273 

benefits  of  progress."*  The  means  of  distribution  by  a 
change  in  the  wages  level  seems  to  be  overlooked.  The 
same  sort  of  suppression  of  comparison  was  "carried  to 
excess  in  the  recent  campaign  literature.  One  writer 
confessed  that  he  is  "one  of  those  who  are  glad  to  see 
the  prices  of  things  becoming  cheaper  and  cheaper,  so 
that  the  laboring  man  can  buy  more  and  more  with 
every  dollar  that  he  receives."  t  Another,  after  assert- 
ing that  in  connection  with  rising  wages  the  fall  of 
prices  has  measured  man's  command  over  nature, 
alleged  that  "through  it  the  world  is  helped  in  its  grand 
march  onward  and  upward."  t  And  still  another,  after 
pointing  out  that  with  lower  prices  workmen  who  get 
higher  wages  are  better  off,  convincingly  asked:  "Why 
should  the  fall  in  prices  be  thought  a  calamity?"  ||  For 
this  last  method  a  not  uncommon  pretension  is  ad- 
vanced to  the  effect  that  under  it  laborers  are  doubly 
benefited,  being  benefited  both  by  the  fall  of  prices  and 
by  the  rise  of  wages.**  It  is  true  that  the  benefit  is  here 
taken  in  two  forms;  but  this  in  itself  does  not  show 
that  the  benefit  is  greater  than  in  either  of  the  single 
ways  of  taking  it,  nor  has  any  attempt  been  made  to 
show  that  it  is  so,  or  why  it  should  be  so. 

Naturally,  in  this  subject,  the  only  argument  of  any 
validity  is  one  that  goes  to  show  that  under  one  of  these 
methods  of   distribution  the  laborer  gets  more  benefit 


*  Political  Science  Quarterly,  June  1900,  p.  214. 

tDeWitt  Warner,  op.  cit.  p.  379. 

tMcClear}-,  op.  cit.  p.  12. 

II  Jackson,  op.  cit.  p.  7.     It  would  be   a  calamity  if  workmen  and 

others  got  less  increase  than  they  would  have  got  under  another  system. 

**Even   Chevalier   said   that   the   progress   of  wealth   is   extending 

especially  to  laborers  "under  the  action  of  a  double  cause,"  Revue  des 

Deux  Mondes,  April  1,  1876,  p.  579. 


274  SYSTEMATIC    REVIEW 

than  he  would  get  under  either  of  the  others, — or 
rather,  although  this  is  generally  overlooked,  that  he 
gets  more  nearly  the  right  and  just  amount  of  his  share. 
This  is  the  dynamic  argument,  which  rarely  appears.  A 
couple  of  instances  of  it  may  here  be  quoted,  both  in 
favor  of  the  second  position.  The  one  is  an  argument 
from  advantage  of  position,  the  other  an  argument  from 
diminution  of  friction. 

Forssell:  "If  I  look  at  things  from  the  sole  standpoint  of  the 
great  bulk  of  the  populations  whose  livelihood  depends  on  wages, 
what  an  evident  advantage  is  this  augmentation  of  the  value 
[exchange-value]  of  money.  They  would,  doubtless,  under  this 
system  [of  falling  prices  and  contracting  money],  have  to  struggle 
to  keep  up  and  defend  their  wages  against  masters  wanting  to  re- 
duce them,  just  as  on  a  rise  of  prices,  an  increasing  abundance  of 
money,  they  have  to  struggle  to  raise  those  wages.  But  what  a 
difference  of  position;  what  a  difference  in  these  combats  between 
defense  and  attack.  How  much  easier  is  conservation  than  acqui- 
sition." In  International  Monetary  Conference,  1881,  Proceedings, 
published  at  Cincinnati,  pp.  274-5,  [Here,  however,  the  argu- 
ment is  for  falling  prices  over  against  rising  prices.] 

Egberts  :  "  If  prices  fall  to  correspond  with  improvements  in 
production,"  this  "affords  the  simplest  and  most  effective  means  by 
which  the  benefits  of  progress  may  be  distributed  to  the  masses. 
The  benefits  go  direct  to  all  consumers,  the  ignorant  and  intelli- 
gent, the  weak  and  the  strong,  sharing  on  comparative  equality  in 
proportion  as  they  are  consumers.  On  the  other  hand,  if  com- 
modities are  always  to  be  stable  or  rising  in  price,  no  matter  to 
what  extent  labor  may  be  eliminated  from  them,  the  benefits  from 
such  improvements  reach  the  masses  more  indirectly,  slowly,  and 
unevenly.  Each  wage-earner  to  get  his  share  must  obtain  a  cer- 
tain advance  in  his  rate  of  pay.  How  much  that  advance  should 
be  he  does  not  know,  and  a  fight  for  it  always  involves  risks  and 
difficulties  which  all  are  not  equally  ready  or  able  to  meet.  The 
average  man  is  much  more  independent  in  claiming  the  bottom 
price  on  what  he  wants  to  buy  than  in  demanding  the  highest  price 
on  the  labor  or  products  he  has  to  sell."    Report  of  the  Director  of 


COMPARISON   OF   THE   STANDARDS  275 

Mint,   in  the  Annual   Report  of  the  Secretary  of  the  Treasury 
Washington,  1898,  p.  574. 

The  weighing  of  such  arguments  must  be  reserved 
for  the  next  Part.  Here  it  may  only  be  added  that, 
as  regards  especially  favoring  laborers,  the  second  and 
third  positions  are  those  which  distribute  more  of  the 
benefits  of  progress  to  the  inactive  creditors  than  does 
the  first.  Therefore  it  would  be  strange  if  under  those 
systems  the  laborers  also  got  a  positively  larger  amount 
of  the  smaller  share  left  for  distribution  between  them 
and  their  employers. 


PART  IV.     TOWARD  A   SOLUTION 


CHAPTER   I 

NATURE   OP   THE   STANDARDS 

§1.  A  few  remarks  are  in  order  about  the  different 
standards  and  the  nature  of  the  arguments  by  which 
they  are  to  be  judged. 

The  commodity  standard  is  not  to  be  held  on  the 
ground  that  commodities  in  general  are  more  likelj'  to 
be  stable  in  "value"  than  any  single  commodity  such  as 
gold  or  silver;  for  that  would  invoke  the  idea  of  some 
other  kind  of  value  than  exchange -value,  of  which  this 
is  the  standard.  It  is  to  be  held  for  the  reason  that  as 
a  mathematical  fact  the  total  exchange -values  of  all 
things,  in  given  quantities,  together  are  eoustant,  and 
the  general  exchauge-value  of  any  one  commodity,  or 
of  money,  is  to  be  estimated  only  by  reference  to  the 
totality  of  other  commodities. 

In  practice  it  is  not  possible  to  take  account  of 
absolutely  all  commodities,  and  only  certain  workable 
kinds  can  be  selected,  which  must  be  employed  with 
relative  weighting  according  to  their  importance  during 
the  periods  compared.  Also,  from  the  consumer's  point 
of  view,  the  tracking  of  retail  prices  would  be  the  more 
desirable;  and  yet  it  is  practicable  only  to  deal  with 
wholesale  prices.  All  that  is  required  in  this  subject, 
as  in  everything  else,   is  to  do  the  best  we  can.     It  is 

(276) 


NATURE    OF  THE  STANDARDS  277 

pure  captiousness  to  abandon  the  commodity  standard 
on  account  of  its  imperfections,  and  to  accept  other 
standards  which  have  not  been  worked  out  even  so  well 
as  this.  No  more  in  economics  than  in  religion  ought 
we  to  strain  at  gnats  and  swallow  camels.  The  fact, 
therefore,  of  our  not  being  able  to  form  an  absolutely 
perfect  standard  of  exchange-value,  is  no  reason  why 
we  should  cease  to  desire  that  money  should  be  stable  in 
exchange -value,  provided  there  is  good  reason  for  this 
desire.  And  if  we  entertain  this  desire,  the  "multiple 
standard,"  with  all  its  imperfections,  gives  us,  to  repeat 
the  words  of  Professor  Marshall,  "a  tenfold  better 
standard  of  [this]  value  than  that  afforded  by  the 
precious  metals." 

Commodities  are  not  the  only  products  that  have 
exchange -value.  Services— in  the  passive  sense  of  work 
done,  not  in  the  active  sense  of  labor — are  also  ex- 
changeable objects.  They  ought  therefore  to  be  included. 
And  some  of  them  may  be — such  as  the  transportation 
of  persons.  But  the  majority,  unfortunately,  must  be 
omitted  simply  because  they  are  unworkable.  They  are 
left  out  for  the  same  reason  that  many  commodities  are 
neglected. 

§2.  But  wages,  or  earnings,  or  incomes  are  to  be 
excluded  absolutely.  They  belong  in  another  standard, 
to  measure  another  kind  of  value.  Some  of  them,  also, 
constitute  a  part  of  the  price  of  goods.  As  for  the 
wages  of  domestic  servants,  these  are,  indeed,  an  item 
of  retail  expense  in  the  budgets  of  some  classes  of  society. 
They  could,  therefore,  enter  only  a  multiple  standard 
using  retail  prices,  which,  as  above  said,  is  imprac- 
ticable, and  would,  at  best,  only  accommodate  some 
classes  of  society. 


278  TOWARD   A    SOLUTION 

If  wages  are  used  along  witli  the  prices  of  commodi- 
ties, it  should  be  distinctly  recognized  that  we  are  no 
longer  measuring  the  exchange -value  of  money,  but  a 
mean  between  it  and  another  kind  of  value.  In  this 
prices -and -wages  standard  it  is  essential  to  determine  the 
relative  weight  to  be  attached  to  each  of  the  two  ele- 
ments. It  might  seem  best  to  treat  them  as  equally 
important.  Then  equal  importance  must  be  ascribed  to 
them  as  wholes.  If  fewer  wages  were  used  than  com- 
modities, compared  with  the  whole  of  wages  and  with 
the  whole  of  commodities,  still  the  wages  used  should 
<!ount  as  equally  important  with  the  commodities  used. 
The  principle  is  that,  on  the  one  side,  the  greatest  num- 
ber possible  of  wages  and  salaries,  or  earnings  in 
general,  should  be  contrasted  with  the  greatest  number 
possible  of  commodities,  on  the  other.  Naturally'-,  what- 
ever is  shown  to  be  needed  in  the  commodity  standard 
and  in  the  wages  standard  separately,  is  to  be  applied  to 
the  corresponding  element  in  this  compound  standard. 

This  standard  is  based  upon  the  idea  that  there  is 
compensation  by  wages  for  prices,  or  by  prices  for 
wages,  a  rise  of  wages  neutralizing  a  fall  of  prices,  or 
conversely.  Yet  in  reality  there  is  little  such  compen- 
sation. To  the  laborers  themselves,  instead  of  compen- 
sation, there  is  cumulation,  as  they  can  buy  more 
goods  with  the  same  money  and  earn  more  money,  or 
reversely.  Tothe  undertakers  of  industry,  who  employ 
laborers,  in  the  case  of  falling  prices  and  rising  wages, 
if  there  is  compensation,  it  must  come  from  improved 
machinery,  and  more  economical  methods,  which  are 
another  matter,  since  the  cheapness  of  the  raw  materials 
is  offset,  and  often  more  than  offset,  by  the  cheapness 
of  the  product.     The  compensation  is  confined  to^the 


NATURE    OF   THE   STANDARDS  279 

class^of  those  who  live  on  fixed  incomes;  and  even  with 
regard  to  these,  it  is  questionable  how  much  they  spend 
relatively  on  services  and  on  commodities,  so  that  per- 
haps an  uneven  weighting  ought  to  be  used,  and,  again, 
only  the  wages  of  domestic  servants  and  retail  prices. 
There  is  absolutely  no  compensation  between  wholesale 
prices  and  the  wages  of  laborers  engaged  in  productive 
industries.  And  if  the  standard  be  extended  into  the 
prices -and -incomes  standard,  there  is  absolutely  no  com- 
pensation at  all,  but  only  cumulation  —  which  is  very 
desirable  in  the  form  of  advancing  real  incomes,  but  not 
serviceable  as  a  basis  for  the  standard  of  the  value  of 
money.  The  intermediate  standard,  therefore,  has  no 
theoretic  justification. 

§  3.  The  ivages  standard  is  properly  a  standard  com- 
posed of  all  earnings.  But  as  with  commodities,  so  with 
earnings,  many  have  to  be  left  out,  because  unworkable. 
It  would  seem,  however,  that  many  more  than  mere 
wages  are  workable.  Certainly  the  majority  of  salaries 
are.  At  all  events,  the  nnworkability  of  other  earnings, 
such  as  profits,  is  the  only  excuse  for  the  limitation  of 
the  earnings  standard  to  the  wages  standard;  for  to 
show  benevolent  concern  principally  for  the  poor  labor-  j^-^  i 
ing  man  is  to  border  upon  demagogism,  indulgence  in 
which  may  be  permissible  to  the  politician  but  not  to 
the  economist.  The  earnings  standard,  then,  is  as 
imperfect  in  its  kind  as  is  the  commodity  standard  in 
its,  and,  confined  to  the  wages  standard,  it  is  more 
imperfect  than  the  commodity  standard  need  be.  In  the 
wages  standard,  of  course,  the  relative  importance  of  the 
different  kinds  of  wages  must  be  allowed  for.  There 
are  thus  in  the  wages  standard  the  same  problems  of 
averaging  and  weighting,  as  in  the  commodity  standard. 


280  TOWARD    A    SOLUTION 

It  is  surprising  to  see  Mr.  Shad  well,  for  instance,  find- 
ing no  trouble  in  the  working  out  of  the  wages  stand- 
ard, while  rejecting  the  commodity  standard  for  its 
similar  and  no  greater  difficulties.  In  the  wages  stand- 
ard there  is  one  item  to  be  included  that  has  no  corre- 
sponding item  in  the  commodity  standard.  The  zero 
price  of  unsold  and  unused  commodities  is  not  to  be 
counted  in  the  commodity  standard.  In  the  wages 
standard  the  zero  wage  of  the  unemployed  ought  to  be 
included.*  Here  is  additional  difficulty  how  to  make 
such  allowance. 

§4.  The  cost  standard  has  generally  been  treated  as 
a_standard  of  cost  of  production,  or  amount  of  labor 
required  in  production,  with  this  being  identified  cost- 
value,  at  least  in  the  case  of  unmonopolized  goods. 
But  no  class  even  of  unmonopolized  goods  is  produced 
at  one  uniform  labor  cost.  Then  the  idea  of  the 
Rijcardian  school  is  that  we  should  take  only  the  cost  of 
production  at  the  poorest  source  worked  or  the  greatest 
cost  of  production  profitably  applied,  as  the  cost  of  pro- 
duction in  question.  This  may  be  well  enough  in  seek- 
ing the  cause  (or  rather  a  concomitant  condition)  of 
relative  values  (confined  to  some  goods),  but  hardly  in 
the  case  before  us.  Rather  the  average  cost  of  pro- 
duction would  be  better.  But  better  still:  the  people 
who  consume  an  article  are  not  so  much  interested  in 
the  cost  of  production  of  it  to  the  comparatively  few 
persons  who  produce  it,  as  they  are  in  the  cost  of  it 
to  themselves.  That  is,  people  in  general  are  not  so 
much  interested  in  the  cost  of  production  of  an  article 
as  they  are  in  its  cost  of  acquisition.     Or  if  it  be  ob- 


*Cf.  Malthus,  Essay  on  population,  p.  378,  and  Newcomb,  Prinei' 
ple$,  p.  212. 


NATURE    OF   THE   STANDARDS  281 

jected  that  the  producers,  though  fewer,  are  proportion- 
ately more  interested,  so  that  to  them  the  products  are 
as  important  as  to  the  consumers,  it  may  be  replied 
that  this  would  be  true  in  a  state  in  which  all  are 
producers,  but  where  some  are  idle  occupants  of  accu- 
mulated capital,  it  remains  true  that  the  interest  in 
production  of  the  consumers  is  different  from  that  of 
the  producers.  Thus  the  cost  of  a  product  has  two 
sides:  the  labor  cost  of  its  production,  and  the  cost  of 
its  acquisition,  which,  though  ultimately  a  labor  cost, 
is  not  so  to  everybody.  For  their  services,  or  for  the 
products  of  their  labor,  people  generally  get  money,  and 
for  money  the  commodity  which  they  and  others  con- 
sume. How  much  labor  people  on  the  average  must 
expend  to  get  the  money  with  which  they  and  others 
get  the  commodity,  is  the  cost  of  acquisition  of  the 
commodity.  And  direct^ly  in  the  case  of  mone^-,  the 
average  quantity  of  labor  they  expend  to  get  a  given 
sum  of  money  is  the  cost  of  acquisition  of  money. 

§5.  This  brings  us  back  to  the  wages  or  earnings 
standard.  But  the  cost  standard  (of  cost-value)  may 
be  made  to  differ  from  the  earnings  standard  (of  esteem- 
value)  in  the  following  ways.  The  cost  standard  is  the 
cost  in  labor  measured  by  a  given  amount  of  time  — 
so  many  hours  of  toil  —  needed  on  the  average  to  get 
an  article  for  consumption,  or  monej-  for  spending. 
The  wages  standard  is  the  relation  to  the  day's  labor 
required  to  get  the  thing,  without  regard  to  the  vary- 
ing number  of  hours  usually  applied  to  labor  during 
the  day.  For  not  only  the  individual,  as  he  prospers, 
devotes  less  time  to  work  and  more  to  recreation,  but 
also  the  race,  as  it  advances  in  the  arts  of  production, 
takes   the   benefit   from   such    improvement    partly   in 


282  TOWARD    A    SOLUTION 

greater  produce  and  partly  in  greater  repose.  Now,  in 
the  course  of  such  progress,  with  increasing  production 
and  with  shortening  of  the  day's  application  to  labor, 
if  money  were  to  remain  stable  in  cost -value,  it  would 
rise  in  wages-value,  and  if  it  were  to  remain  stable  in 
wages-value,  it  would  fall  in  cost-value.  This  wages- 
value  may  be  esteem -value.  In  this  way  Professor 
Clark's  emendation  of  the  labor  standard  deserves  re- 
spect. The  cost  standard  is  the  wages  standard,  or 
^  the^earnings  standard,  with  wages,  or  earnings,  meas- 
ured by  the  hour.  The  wages  standard  proper  or  the 
earnings  standard  proper,  is  with  wages,  or  earnings, 
measured  by  the  day.  But  this  is  not  all.  In  the 
wages  standard  taken  as  a  cost  standard,  only  the 
wiiges  and  earnings  of  actual  producers  must  be  con- 
sidered; but  when  the  wages  standard  is  taken  as  a 
standard  of  esteem -value,  the  zero  wages  of  the  unem- 
ployed, as  already  remarked,  must  be  included.  More- 
over, as  above  indicated,  esteem -value  seems  to  be  a 
matter  not  only  of  earnings  but  also  of  incomes,  that 
is,  consideration  must  also  be  taken  of  those  who  live 
idly  on  rent  and  interest,  or  of  the  extent  to  which 
people  live  on  these.  And  now  with  money  stable  in 
esteem -value,  it  would  seem  that  the  average  of  all 
incomes  should  remain  constant  (which  would  permit 
of  all  earnings  rising  or  falling  if  counterbalanced  by 
opposite  variations  of  derivative  incomes).  But  with 
money  stable  in  cost -value,  it  would  seem  that  the 
average  incomes  only  of  the  producers  (their  net  earn- 
ings) should  remain  constant.  In  this  way  of  measur- 
ing things,  the  esteem -value  of  money  might  fall  more 
than  its  cost -value,  in  case  the  non- producers  get  a 
greater  share  of  the  benefits  of  progress,  or  less  if  they 


NATURE   OF   THE    STANDARDS  283 

get  a  smaller  share.  It  is  its  esteem -value  to  the  whole 
community  that  would  so  exceed,  although  to  a  less 
degree  than  to  the  non -producers;  not  its  esteem -value 
to  the  producers,  which,  in  this  conception,  could  vary 
only  with  its  cost-value.  As  yet  these  ideas  can  be 
advanced  but  tentatively.  Perhaps  the  idea  of  cost- 
value  should  be  abandoned  altogether.  It  may  be 
swallowed  up  in  the  idea  of  esteem -value.  The  idea 
of  esteem -value  still  needs  development,  especially  as 
regards  its  measurement  through  the  course  of  time. 

§  6.  These  standards  diverge  and  become  distinct 
only  when  there  is  advance  or  retrogression  in  material 
civilization.  Were  average  costs  of  production  and 
average  wealth  stable  over  a  period  of  time,  in  this 
period  of  time  the  commodity  standard  and  the  labor 
standard  in  each  of  its  forms  would  coincide,  and 
money  might  be  stable  both  in  exchange -value  and  in 
cost-value  or  esteem-value,  or  it  might  vary  in  all 
these  values  alike.*  With  average  costs  of  production 
remaining  unchanged,  there  may  be  increase  or  decrease 
in  average  wealth  according  as  a  larger  or  smaller  pro- 
portion of  the  population  are  actively  engaged  in  pro- 
duction; in  which  case  the  two  labor  standards  may 
separate,  and  money,  if  it  remains  stable  in  cost-value, 
and  then  presumably  also  in  exchange -value,  may  fall 
or  rise  in  esteem-value,  or  if  it  varies  in  cost-value  and 
in  exchange-value,  may  diflferenth*  vary  in  esteem- 
value.  Such  changes  as  the  last  take  place  mostly  in 
short   periods,   owing   to  waxing   or  waning  of  credit 


*"If  labor  were  upon  an  average  equallj'  productive  one  time  with 
another,  these  two  conceptions,  though  theoretically  different,  would  lead 
to  results  practically  the  same.  But  when,"  etc.  J.  A.  Smith,  op.  cit. 
p.  10. 


284  TOWARD    A    SOLUTION 

conditions.  Over  periods  of  many  years  with  improve- 
ments in  industry,  transportation,  and  facilities  of  com- 
merce, money  cannot  be  stable  both  in  exchange -value 
and  in  the  other  kinds  of  value.  If  it  is  stable  in 
exchange- value,  it  will  fall  in  the  other  kinds  along 
with  commodities  in  general;  and  if  it  is  stable  in  the 
other  kinds  while  commodities  fall,  it  will  rise  in  ex- 
change-value. And  conversely  in  case  of  retrogression. 
Of  course,  progress  is  desired,  and  so  it  is  desirable, 
not  that  money  should  be  stable  in  both  or  in  all  the 
kinds  of  value,  but  that  it  should  be  stable  only  in  one 
kind, —  and  which  this  one  kind  should  be,  is  our 
problem.  Such  progress,  luckily,  is  taking  place  at 
the  present  day,  and  it  is  only  on  the  supposition  of 
the  further  continuance  of  this  progress  that  our 
problem  is  of  interest. 

The  more  rapid  the  progress,  the  more  apparent  the 
problem.  Herein,  and  in  two  other  circumstances,  may 
I  be  found  the  explanation  of  the  fact  that  the  problem 
'  was  not  noticed  until  the  nineteenth  century,  and  that  it 
was  noticed  then.  Although  there  has  been  almost  con- 
stant progress  for  at  least  four  or  five  centuries,  never 
before  has  the  progress  been  so  rapid  as  it  has  been 
during  the  past  hundred  and  fifty  years.  Therefore  the 
divergence  between  the  different  kinds  of  value  of  money 
has  been  greater  in  these  years  than  ever  before,  and 
consequently  the  existence  of  the  problem  more  con- 
spicuous. Also  during  this  period  the  study  of  eco- 
nomic problems  in  general  began  to  attract  closer 
attention,  and  of  late  has  become  more  scientific,  with 
demand  for  stricter  accuracy  in  the  measurement  of 
facts.  Hence  greater  theoretical  need  has  been  felt  of 
settling  the  problem.     Finally,  it  is  in  this  period  that 


NATURE    OF   THE    STANDARDS  285 

there  have  been  severer  shortenings  in  the  supply  of 
money j_with  noticeable  falls  in  general  prices.  Previ- 
ously, people  were  satisfied  so  long  as  money  did  not 
depreciate  in  exchange -value — and  they  did  not  even 
much  mind  such  depreciation.  During  the  last  century 
they  were  twice  confronted  with  long  periods  of  appreci- 
ation of  money  in  exchange -value,  which  a  large  portion 
of  the  community  did  not  like  and  to  which  they  loudly 
objected,  while  other  classes,  numerically  in  a  minority, 
but  superior  in  dialectical  skill  in  defending  their  own 
interests,  approved,  and  sought  defense  in  alleging  that 
money  was  stable  in  "real  value,"  meaning  some  kind 
of  labor-value,  and  so  set  this  up  as  a  rival  standard  to 
the  old  commodity  standard.  Only  then  the  controversy 
over  the  problem  began  in  earnest.  It  is  curious,  how- 
ever, that  even  during  that  century  the  existence  of  the 
problem  has  also,  by  intelligent  men,  been  constantly 
ignored.* 

In  such  periods  of  progress  the  different  kinds  of 
value  of  money,  graphically  viewed,  go  in  diverging 
lines.     Many  economists  show  contentment  so  long  as 


*We  have  already  tarried  over-long  with  the  confusion  that  has 
reigned  on  this  subject.  Yet  one  more  instance  may  be  cited.  In  Agri- 
culture and  bimetallism.  "A  new  tvay  to  pay  old  debts,"  a  Cobden  Club 
Leaflet,  no.  Ixiii,  London,  March  1889,  G.  W.  Medley  wrote:  "The 
fallacy  lies  in  reckoning  the  pound  sterling  in  1873,  and  in  1889,  as  the 
same  thing.  Physically  speaking,  this  is  true,  for  the  coin  is  the  same 
weight  and  fineness  in  gold.  Economically  speaking,  it  is  not  the  same 
thing,  for  a  pound  sterling  in  1889  represents  a  greater  quantity  of 
human  effort  than  it  did  in  1873.  To  obtain  a  pound  sterling  in  1873  a 
quantity  in  other  commodities  had  to  be  given  for  it,  which  may  be  rep- 
resented by  the  figure  100.  In  1889,  owing  to  the  fall  in  prices,  the 
quantity  to  be  given  in  exchange  is,  say,  145,"  etc.,  p.  3.  Here  no 
cognizance  is  shown  of  the  fact  that  the  labor  standard  and  the  com- 
modity standard  had  parted  company  between  1873  and  1889,  and  of  the 
consequent  need  of  making  a  choice  between  them. 


286  TOWARD    A    SOLUTION 

any  one  of  these  lines  is  horizontal,  or  so  long  as  the 
horizontal  line  is  contained  within  the  bunch.  Some, 
as  we  have  seen,  have  desired  the  horizontal  line  to  be 
midway  between  the  extremes.  Discontent  is  then 
shown  only  if  all  the  values  of  money  either  rise  or 
fall, —  although  less  discontent  is  usually  manifested  if 
they  all  fall,  including  its  exchange -value,  which,  in  a 
state  of  progress,  is  the  last  to  fall,  than  if  they  all  rise, 
including  its  esteem -value,  which  in  this  case  is  the  last 
to  rise.  But  such  is  a  very  unprecise  attitude  to  take 
on  the  subject.  To  defend  a  monetary  system  so  long 
as  some  one  of  the  kinds  of  value  of  money  is  stable,  or 
so  long  as  the  variation  of  one  of  its  kinds  is  offset  by 
an  opposite  variation  of  another,  is  really  to  pass  from 
approval  of  stability  of  money  in  one  kind  of  value  to 
approval  of  its  stability  in  another  kind  of  value,  and  is 
to  have  no  settled  opinion  on  the  subject  at  all.  Such 
an  attitude  may  be  better  than  to  be  utterly  indifferent 
as  to  how  the  values  of  money  vary.  But  it  is  only  one 
remove  from  such  indifference,  and  does  not  reach  the 
precision  demanded  bj^  science. 

§7.  To  aid  in  forming  a  decision  between  the  differ- 
ent standards,  it  may  be  well  here,  before  passing  on  to 
the  arguments  for  them,  briefly  to  review  the  prominent 
features  wherein,  during  periods  of  progress  or  of  decay, 
they  differ.  This  may  be  best  done  in  a  parallel  pre- 
sentment of  money  behaving  according  to  each  of  them, 
as  follows:  — 


COMMODITY 
STANDARD 

Money  stable  in  ex- 
change-value. 

Money  a  constant 
standard     of    pur- 


COST 
STANDARD 

Money  stable  in  cost- 
value. 

Money  a  constant 
standard  of  produ- 


INCOME 
STANDARD 

Money     stable     in 

esteem-value. 
Money     a     constant 

standard  of  produ- 


NATURE    OF   THE   STANDARDS 


287 


chasing  power  (or 
of  producing  power 
measured  by  efifi- 
cieucy). 

Money  such  that  the 
money-value  is  con- 
stant of  a  constant 
total  quantity  of 
commodities, 


Money  such  that  the 
prices  of  commodi- 
ties, while  varying 
amongst  them- 
selves according  to 
their  costs  of  pro- 
duction or  to  their 
supply  and  demand 
(or  whatever  else 
be  the  cause  of  the 
variations  of  their 
relative  values), 
shall  vary  in  such 
wise  as  to  maintain 
constant  the  gen- 
eral level  of  prices, 
80  that  a  change  in 
the  price  of  a  com- 
modity   marks    its 


any  increase  or  de- 
crease in  the  total 
output,  howsoever 
brought  about,  ap- 
pearing as  increase 
or  decrease  of  the 
total  money-value. 


cing   power  meas- 
ured by  the  hour. 


Money  such  that  the 
money-value  is  con- 
stant of  the  total 
quantity  of  com- 
modities produced 
in  a  given  number 
of  hours  of  actual 
work. 


which  quantity  va- 
ries as  there  are 
improvements  or 
failures,  such  vari- 
ation appearing  ( it 
is  alleged)  in  the 
increase  ordecrease 
of  the  purchasing 
power  of  money. 


Money  such  that  the 
prices  of  commodi- 
ties shall  vary  ac- 
cording to  their 
costs  of  production 
in  labor  measured 
by  the  hour. 


so  that  a  change  in 
the  price  of  a  com- 
modity   marks    its 


cing  power  meas- 
ured by  liie  day 
(with  variable  hours 
of  work  and  vari- 
able employment). 

Money  such  that  the 
money-value  is  con- 
stant of  the  total 
quantity  of  com- 
modities produced 
iu  the  day's  work 
(of  variable  hours, 
and  also  with  va- 
riable numbers  of 
employed  workers 
out  of  a  given 
population), 
which  quantity  va- 
ries as  there  are 
improvements  or 
failures,  with  in- 
crease or  decrease 
of  employment 
relatively  to  the 
population,  such 
variation  appearing 
in  the  increase  or 
decrease  of  the  pur- 
chasing power  of 
money. 

Money  such  that  the 
prices  of  commodi- 
ties shall  vary  ac- 
cording to  the  esti- 
mation in  which 
they  are  held,  ac- 
cording to  their 
final  utility,  or  ac- 
cording to  their 
costs  of  production 
measured  by  the 
day  (with  variable 
hours  of  work,  and 
variable  amount  of 
employment), 

so  that  a  change  in 
the  price  of  a  com- 
modity   marks    its 


288 


TOWARD    A    SOLUTION 


variation  in  general 
exchange-value, 
wliile  the  general 
level  of  earnings  or 
incomes  varies  with 
increase  or  decrease 
of  average  real 
wealth. 


variation  in  cost- 
value,* 

while  the  general 
level  of  net  earn- 
ings, measured  in 
hours  of  actual 
work,  is  constant, 
increase  or  decrease 
of  the  average  real 
wealth  of  the  pro- 
ducers appearing  in 
the  increase  or  de- 
crease of  the  pur- 
chasing power  of 
such  earnings. 


variation  in  esteem- 
value, 

while  the  general 
level  of  gross  earn- 
ings, measured  in 
days  of  work  (as 
above),  or  of  in- 
comes, is  constant, 
increase  ordecrease 
of  the  average  real 
wealth  of  the  whole 
community  appear- 
ing in  the  increase 
or  decrease  of  the 
purcliasing  power 
of  such  incomes. 


CHAPTER  II 


NATURE    OF    THE    ARGUMENTS    FOR    THE     STANDARDS 

§1.  In  arguing  between  the  standards  we  should  be 
careful  to  refrain  from  adopting  one  kind  of  value  as 
the  only  true  or  real  value  and  then  concluding  that 
money  ought  to  be  stable  in  this  kind  of  value.  At  the 
present  day  many  economists,  especially  in  Austria,  are 
devoting  attention  to  elaborating  the  conception  of 
esteem -value,  and  the  tendency  shows  itself  among  them 
to  view  this  kind  of  value  as  the  only  value.  They  may 
b4_right  in  substituting  this  conception  for,  and  oust- 
ing, the  conception  of  cost -value,  because  the  concep- 
tion of  cost-value  seems  to  have  had  its  origin  in  a 
mistaken  theory  of  relative  values.  But  however  much 
the  conception  of  esteem -value  may  substitute  itself  for 


*As  a  matter  of  fact,  not  all  prices  will  dose,  and  herein  lies  one  of  the 
defects  of  the  cost  standard. 


NATURE    OF   THE    ARGUMENTS  289 

the  conception  of  cost- value,  it^ cannot  do  away  with  the 
conception  of  general  exchange-value.  The  economists, 
therefore,  who  eomnieudably  immerse  themselves  in  the 
study  of  esteem -value,  commit  a  paralogism  if,  after 
obtaining  some  success  in  developing  the  conception  of 
a  stable  esteem -value,  they  thereupon  immediately  con- 
clude that  money  ought  to  possess  stability  of  esteem- 
value.  Their  argument  proceeds  somewhat  in  this 
fashion:  Money  ought  to  be  stable  in  value;  value  is 
esteem -value;  ergo  money  ought  to  be  stable  in  esteem- 
value.  Here  the  major  premiss,  the  old  dictum  com- 
mon to  almost  all  economists,  is  vague.  The  very 
economists  who  have  established  it  have,  some  of  them, 
conceived  of  value  as  esteem -value  (and  even  as 
cost -value),  and  some — and  the  greater  number  — 
as  exchange-value;  and  still  others  have  conceived  of  it 
confusedly  as  either  or  as  both.  The  old  doctrine, 
therefore,  is  unserviceable  as  a  major  premiss,  since 
it  is  ambiguous.  The  argument  reduces  to  this:  Money 
ought  to  be  stable  in  some  kind  of  value;  the  kind  of 
value  in  question  is  esteem -value;  ergo  mone}"  ought  to 
be  stable  in  esteem -value.  But  here  the  conclusion  is 
really  not  reached  as  the  result  of  an  argument,  since  it 
is  entirely  contained  in  the  minor  premiss,  which  asserts 
that  esteem -value  is  the  kind  of  value  in  which  money 
ought  to  be  stable.  Therefore  argument  is  needed  to 
establish  this  minor  preuiiss;  or  i-ather,  argument  is 
needed  to  establish  the  desired  conclusion.  Esteem- 
value  may  be  a  very  important  kind  of  value;  but  it 
cannot  possibly  be  shown  to  be  the  only  kind,  nor  can 
exchange -value  be  argued  out  of  existence.  And  there 
may  be  importance  in  our  being  able  to  measure  stability 
or  variation  in  esteem -value;   but  this  does  not  show, 


290  TOWARD   A    SOLUTION 

and  nothing  can  show,  the  unimportance  of  our  being 
able  to  measure  stability  or  variation  in  exchange -value. 
And  it  may  be  that  money  ought  to  be  stable  in  esteem- 
value  rather  than  in  exchange -value,  when  these 
diverge;  but  before  we  adopt  this  opinion  we  need  good 
reason  for  holding  that  money  ought  to  be  stable  in  the 
one  rather  than  in  the  other  kind  of  value.  The  two 
kinds  of  value  are  distinct  competitors,  and  the  contest 
between  them  is  not  a  logomachy:  it  cannot  be  decided 
by  saying  the  term  "value"  means  only  esteem-value, 
since  it  does  not,  nor  by  saying  it  properly  means  only 
esteem -value,  since  the  very  question  at  issue  is  as  to 
whether  it  properly  means  esteem -value  in  this  con- 
nection. And  even  if  the  decision  be  reached  that  the 
term  "value"  ought  in  the  future  to  be  used  only  in  the 
sense  of  esteem -value,  and  that  the  term  "exchange- 
value  "  should  be  discarded  and  in  its  place  be  used  the 
term  "purchasing  power,"  so  as  to  prevent  this  idea 
being  subsumed  under  the  concept  of  value,  the  question 
would  still  remain,  but  merely  altered  into  the  new 
form,  as  to  whether  money  ought  to  be  stable  in  "value  " 
in  this  restricted  sense,  ®r  whether  it  ought  to  be  stable 
in  the  eliminated  sense  of  "purchasing  power," — ;whether 
it  is  a  measure  and  standard  of  "value"  or  of  "purchas- 
ing power."  Of  course,  in  this  form  the  old  dictum 
about  the  desirability  of  money  being  stable  in  "value" 
can  have  no  weight  in  deciding  for  money  being  stable 
in  "value"  in  the  now -to -be -adopted  sense  of  esteem- 
value,  since  the  old  use  of  the  term  "value"  covered  the 
now- to -be -rejected  sense  of  purchasing  power.  Soph- 
istry would  be  emplo3^ed  if  advantage  were  taken  of  this 
alteration  of  phraseology.  But  the  alteration  of 
phraseology   is    itself    to   be   deprecated.      Purchasing 


NATURE    OF   THE   ARGUMENTS  291 

power  is  a  kind  of  value,  and  in  popular  parlance  always 
will  be  identified  with  "value." 

§2.  In  earlier  days  this  form  of  argfuraentation  was 
more  direct.  The  procedure  was  to  assert  labor-value 
in  one  of  its  varieties  to  be  "real  value,"  and  conse- 
quently to  imply  that  money  ought,  of  course,  to  be 
stable  in  "real  value,"  that  is,  in  some  labor-value. 
Great  reliance  was  placed  upon  the  use  of  the  epithet 
"real."  It  may  be  well,  then,  to  pause  a  moment  to 
consider  the  significauce  of  this  little  epithet. 

The  epithet  "real"  is  merely  intensive.  It  means 
either  that  among  several  correct  ways  of  looking  at  a 
thing  the  one  to  which  it  refers  is  the  most  important, 
or  that  among  several  possible  ways  of  interpreting  an 
idea,  all  but  one  being  incorrect,  the  one  to  which  it 
refers  is  the  correct,  proper,  or  true  one.  In  the  latter 
case  the  accepted  meaning  of  the  term  to  which  it  may 
be  prefixed  is  the  same  whether  it  is  prefixed  or  dropped. 
Now,  in_economics  there  are  several  terms  susceptible 
of  different  aspects  or  interpretations,  to  which  terms 
therefore  the  need  has  been  felt  of  sometimes  prefixing 
the  epithet  "real"  to  draw  attention  to  the  fact  that  the 
most  important  or  the  only  correct  waj^  of  viewing 
them  is  being  employed.  Beside  "value,"  these  terms 
are  "cost,"  "price,"  "wages,"  ."earnings,"  "income," 
"wealth,"  etc.  In  ^ach  there  is  a  similar  threefold 
manner  of  interpreting  their  meaning.  They  may  be 
supposed  to  refer  to  labor,  to  money,  or  to  commodities 
in  general;  but  the  proper  way  of  using  them  is  not  the 
same  in  all.  Thus  it  is  evident  that  the  term  "cost,"  at 
least  in  economics,  ought  to  refer  to  expenditure  of 
labor.  It  is  true  that  in  mercantile  affairs  people's 
attention    is  centered   upon    the    money   they   give   up 


292  TOWARD   A    SOLUTION 

(without  noticing  its  derivation)  in  the  acquisition  of 
the  things  they  later  expect  to  sell  with  profit,  and  in 
mercantile  affairs  the  terra  refers  alvva3-s  to  money-costs. 
But  economics  takes  a  wider  view,  and  looks  to  the 
ultimate  thing  which  is  given  up  by  mankind  at  large  in 
the  acquisition  of  the  things  they  consume;  and  this  is 
labor;  so  that  in  economics  the  only  correct  meaning  of 
the  term  is  labor -cost.  The  proper  use  of  the  term 
"price,"  however,  has  reference  in  all  cases  merely  to 
money- prices,  since  to  refer  by  it  to  labor  is  to  identify 
it  with  "cost,"  and  to  refer  by  it  to  any  other  com- 
modity is  to  identify  it  with  "particular  exchange- 
value,"  On  the  other  hand,  the  proper  meaning  of 
"wages,"  or  "earnings,"  can  only  refer  to  commodities 
in  general.  Wages  cannot  be  measured  by  labor;  for 
that  would  be  measuring  it  by  other  wages.  If  the 
labor  of  one  man  will  command  more  of  the  labor  of 
another,  the  labor  of  the  latter  will  command  less  of  the 
labor  of  the  former  —  what  the  one  gains,  the  other 
loses.  Just  as  the  exchange-values  of  commodities  can- 
not all  rise  or  all  fall,  so  the  wages  of  labor  measured 
in  labor  —  labor -wages  —  cannot  all  rise  or  all  fall.  To 
be  sure,  we  might  measure  whether  the  wages  (or  earn- 
ings) of  one  man  or  class  have  risen  or  fallen  bj^  com- 
parison with  the  wages  (or  earnings)  of  all  men,  as  we 
measure  whether  the  exchange -value  of  one  commodity 
or  class  of  commodities,  or  of  money,  has  risen  or  fallen 
by  comparison  with  all  commodities.  But  it  happens 
that  in  the  case  of  wages  we  are  not  interested  so  much 
in  the  measurement  of  some  wages  relatively  to  all,  as 
in  the  measurement  of  all  wages  (or  earnings)  relatively 
to  something  else.  And  the  wages  (or  earnings)  of  all 
men  can  rise  or  fall,  or  vary,  only  in  relation  to  money 


NATURE    OF   THE   ARGUMENTS  293 

or  to  commodities.  Bat  with  their  variation  in  mouej' 
we  are  interested  only  if  we  know  the  stability  or 
variation  of  money  in  pnrehasiug  power  (not  over  labor, 
which  wonld  bring  us  back  to  what  has  just  been 
rejected,  but)  over  commodities.  Pleuce  variation  of 
wages  or  enrnings  in  money,  without  such  additional 
knowledge,  is  regarded  merely  as  nominal;  or  especially 
it  is  regarded  as  merely  nominal  if  it  be  known  that  they 
vary  only  in  money,  and  not  in  commodities.  Thus 
what  we  properly  refer  to  in  wages  or  earnings  —  and 
such  is  the  popular  usage  —  is  the  necessaries  and  con- 
veniences of  life,  or  in  general  commodities,  which 
money -wages  or  money -earnings  enable  the  recipients 
or  gainers  to  purchase.  Further,  "income"  is  only  an 
extension  of  wages  or  earnings  to  include  what  is 
derived  from  capital  without  labor  on  the  part  of  the 
recipient.  Hence  its  proper  ultimate  meaning  must  be 
the  same  as  that  of  wages  cr  earnings.  And  "wealth" 
is  only  a  further  extension  of  income  to  include  the 
capital  itself  whence,  with  application  of  labor,  all 
income  is  derived;  and  consequently  its  meaning  must 
also  be  the  same.  And,  indeed,  we  so  find  it  to  be  in 
popular  usage,  as  well  as  in  economics.  Thus,  two 
countries  with  equal  populations  equally  divided  be- 
tween producers  and  non- producers,  would  have  to  be 
regarded  as  equally  rich,  if  wealth  referred  to  command 
over  labor;  but  we  all  admit  that  two  such  countries 
may  differ  much  in  wealth,  according  to  the  productive- 
ness of  its  labor  in  providing  the  people  at  large  with 
commodities  (in  the  most  general  sense  of  this  term).* 

*Even  Senior,  we  have  seen,  did  not  say  of  two  men  who,  in  India 
and  in  Enghmd,  command  the  same  amount  of  labor,  tliat  they  are 
equally  rich,  but  only  that  the  relation  of  their  wealth  to  the  wealth  of 
the  mass  of  their  countrymen  is  the  same. 


294  TOWABD    A    SOLUTION 

Now,  all  these  meanings  just  distinguished  are  the  real 
meanings  of  the  terms.  Therefore  "real  cost"  must 
mean,  in  economics,  labor-cost  (and  even  in  mercantile 
affairs,  where  "cost"  means  money-cost,  "real  cost" 
ought  still  to  be  used  only  in  the  sense  of  labor-cost); 
and  "real  price"  means  money-price;  and  "real  wages," 
"real  earnings,"  "real  income,"  "real  wealth,"  mean 
commodity-wages,  commodity-earnings,  commodity-in- 
come, commodity -wealth.* 

But  how  about  the  phrase  "real  value"?  Here  we 
must  notice  a  difference,  because  value  is  a  concept  con- 
taining several  kinds  or  species.  The  epithet  "real" 
cannot  properly  be  used  to  apply  to  one  kind  out  of  sev- 
eral kinds,  but  only,  as  above  explained,  to  one  way  of 
conceiving  of  a  thing  out  of  many  possible  ways,  that 
is,  to  the  one  right  way  or  to  the  one  most  important 
way,  with  rejection  of  the  wrong  ways,  or  of  the  less 
important  ways.  But  among  species  there  is  no  dis- 
tinction between  right  and  wrong,  since  they  are  all 
equally  true  species;  and  as  for  a  difference  in  their 
importance,  this  is  not  as  to  the  importance  of  our  using 
the  term  in  one  or  another  sense,  but  as  to  the  impor- 
tance of  the  things  denoted  by  the  several  species  of  the 
concept,  which  may  be  different  for  different  purposes, 
each  one  of  which  must  be  separately  examined,  since 
each  species  has  a  definite  place  that  is  not  to  be 
ignored.  Therefore  we  cannot  rightly  make  use  of  any 
such  phrase  as  "real  value,"  applying  it  to  one  of  the 


•Similarly  "real  interest " must  mean  commodit3'-interest  (although 
in  ordinary  transactions  "interest"  means  only  money-interest);  and 
"real  capital"  must  mean  commodity-capital  (extended  to  all  material 
things;  for  although  capital  may  be  "accumulated  labor,"  the  accumu- 
lation is  in  material  things).  But  these  meanings  are  not  insisted  upon 
h^e^  in  order  not  to  prejudge  an  argument  later  to  be  examined. 


NATURE    OF  TEE   ARGUMENTS  295 

kinds  of  value  alone.  Rather  we  can  have  as  many 
"real  values"  as  are  kinds  of  value.  Thus  "real  cost- 
value  "  can  only  be  cost-value  measured  in  (labor)  cost 
of  production.  "Real  esteem -value"  can  only  be  the 
true  conception  of  esteem -value  out  of  several  concep- 
tions not  yet  clarified.  And  "real  exchange  -  value  "  is 
merely  general  exchange-value,  in  distinction  from  par- 
ticular exchange-values.  And  now,  of  course,  if  money 
should  be  stable  in  cost -value,  it  should  be  stable  in 
"real  cost-value";  if  in  esteem-value,  in  "real  esteem- 
value";  if  in  exchange -value,  in  "real  exchange-value." 
Evidently  no  help  can  be  derived  from  the  proper  use  of 
these  phrases  in  our  problem  of  deciding  whether  money 
should  be  stable  in  cost -value,  in  esteem -value,  or  in 
exchange -value. 

§3.  In  this  connection  also  a  word  must  be  repeated 
in  deprecation  of  the  argument  from  a  theory  of  value 
to  the  theory  of  the  standard.  In  spite  of  the  clear  dis- 
tinction between  these  two  things,  long  ago  pointed  out 
by  Malthus  and  by  J.  S.  Mill,  the  transition  from  the 
one  to  the  other  is  frequently  made.  Only  recently  it 
has  been  said  that  "the  labor  standard  of  deferred  pay- 
ments is  a  logical  consequence  of  the  labor  theory  of 
value."*  The  labor  standard  is  much  rather  an  illogi- 
cal consequence  of  the  labor  theory  of  value, —  that  is, 
whether  the  labor  standard  be  right  or  wrong  for  the 
purpose  assigned,  its  rightness  or  wrongness  for  that 
purpose  is  not  logically  inferred  from  the  correctness  or 
incorrectness  of  tlie  labor  theory  of  value,  which  has  to 
do  with  another  question.  And  also  recently  the  objec- 
tion has  been  brought  against  the  commodity  standard 
that    "it   involves   a   theory  of   value   never   explicitly 

♦  Fetter,  op.  eit.  p.  58. 


296  TOWARD   A    SOLUTION 

enunciated  and  never  implicitly  assumed  except  by "  its 
modern  champions,  a  theory  which  "corresponds  with 
neither  of  the  two  great  value  theories,  the  cost  of  pro- 
duction theory  and  the  final  utility  theory."^  Asa 
matter  of  fact,  the  commodity  standard  involv^es  no 
theory  of  value  whatever.  A  theory  of  value  is  an  ex- 
planation of  why  two  or  more  commodities  exchange  as 
they  do.  It  is  true  that  the  conceptions  of  what  consti- 
tutes stability  of  cost-value  and  of  esteem-value  have 
connection  with  the  cost-of-production  theory  and  with 
the  final -utility  theory,  because  cost -value  is  identified 
with  the  labor  required  to  produce  or  acquire  commodi- 
ties, and  esteem -value  is  identified  with  the  final  utility 
in  commodities  sufficient  to  overcome  the  disutility 
of  the  labor  required  to  produce  or  acquire  them; 
wherefore  each  of  those  conceptions  is  involved  in  each 
of  the  proffered  explanations  of  the  phenomena  of 
values.  But  when  those  conceptions  have  been  framed, 
the  adoption  of  either  of  them  as  yielding  the  proper 
standard  of  deferred  payments  is  in  no  wise  dependent 
upon  the  reasoning  by  which  either  of  those  theories 
was  sought  to  be  established.  And  the  conception  of 
stability  of  exchange -value  is  the  conception  of  one 
commodity  being  stable  in  its  purchasing  power  over 
other  commodities  through  the  variations  of  them  rel- 
atively to  one  another  and  to  it,  without  refei'enee  to  the 
causes  of  the  variations,  or  to  the  explanation  of  them, 
or  to  the  theory  of  them,  and  is  neither  evolved  from, 
nor  involved  in,  any  theory  of  them.  It  might,  per- 
haps, be  regarded  as  an  inconsistency  if  an  advocate  of 
the  cost-of-production  theory  of  relative  values  should 
hold  the  esteem -value  standard  of  deferred  payments,  or 

*Merriam,  op.  cit.  p.  100. 


NATURE    OF   THE   ARGUMENTS  297 

if  an  advocate  of  the  final -utilit}-  theory  of  relative 
values  should  hold  the  cost- value  standard  of  deferred 
payments.  But  the  exchange- value  standard  of  deferi-ed 
payments  may  be  equally  well  held  either  by  the  advo- 
cate of  the  cost-of-production  theory  of  relative  values 
(witness  Torrens)  or  by  the  advocate  of  the  final -utility 
theory  of  relative  values  (witness  Professor  Walras). 
Indeed,  if  he  is  to  have  any  theory  about  relative  values, 
any  explanation  of  why  they  are  as  they  are,  the  advo- 
cate of  the  exchange -value  standard  of  deferred  pay- 
ments must,  it  would  seem,  hold  the  one  or  the  other  of 
those  two  theories, — for  the  demand-and-supply  theory 
is  only  a  vaguely  described  form  of  the  final -utility 
theory. 

§4.  Evidently  the  question  of  propriety,  and  the 
question  of  causes,  are  distinct.  It  is  one  of  the  marvels 
of  warped  ratiocination  that  in  the  recent  campaign 
controversy  about  the  monetary  standards  these  two 
questions  were  constantly  confounded.  In  that  contro- 
versy the  gold  advocates  seemed  to  be  perfectly  content 
if^they  could  only  explain  the  fall  of  prices  by  attribu- 
ting it  to  alterations  in  the  commodities  —  to  their 
reduced  costs  of  production  and  transportation,  or  in 
general  to  their  increased  quantities.  Emphasis  was 
constantly  placed  upon  the  endeavor  to  show  that  the 
cause  of  the  fall  of  prices,  lying  on  the  side  of  com- 
modities, did  not  lie  on  the  side  of  gold;  which  was 
taken  as  proof  that  gold  had  not  changed,  hence  that  it 
had  not  risen  in  "value,"  although  the  fall  of  prices  was 
evidence  that  gold  had  changed,  and  risen,  in  its  pur- 
chasing power  over  commodities,  or  in  "value"  in  this 
sense.  Then  the  constancy  of  gold  in  some  unnamed 
"value,"  or  value  called  "real,"  was  taken  as  an  in  itself 


298  TOWARD    A    SOLUTION 

satisfactory  proof  of  the  right  functioning  of  gold  as  a 
monetary  standard.  Such  reasoning  was  thought  suffi- 
cient even  by  many  of  the  best  of  the  controversialists  in 
the  gold  party.  And  in  the  opposing  party,  but  princi- 
pally by  the  weakest  among  the  bimetallists,  this  line  of 
reasoning  was  so  far  approved  that  attempts  were  made  to 
disprove  some  of  its  details,  as  about  the  cause  being  on 
the  side  of  commodities,  or  to  pooh-pooh  any  idea  of 
gold  being  constant  in  "value,"  and  it  seemed  to  be 
thought  sufficient  merely  to  point  to  the  fact  of  gold 
having  risen  in  exchange -value,  likewise  treated  simply 
as  a  rise  in  "value."  Both  these  sets  of  disputants 
failed  to  see  that  the  real  question  at  issue  between  them 
was  not  yet  touched  upon.  The  two  parties  had  no 
occasion  to  differ  on  the  question  of  causes,  which  is 
another  question,  howsoever  important,  immaterial  in 
the  decision  of  the  question  in  dispute.  The  bimetal- 
lists  might  concede  to  their  opponents  that  gold  had 
remained  tolerably  stable  in  one  of  the  kinds  of  labor- 
value — in  which  one  the  gold  advocates  themselves  have 
not  been  particular,  and  neither  they  have  carefully 
proved  their  position,  nor  have  the  bimetallists  carefully 
disproved  it.  For  the  sake  of  argument,  then,  the 
pretension  may  be  admitted.  And  only  now  does  the 
real  question  at  issue  appear,  as  the  very  thing  needed 
is  argument  to  show  that  money  ought  to  be  stable  in 
cost-value  or  esteem-value,  or  that  it  ought  to  be  stable 
in  exchange -value.  This  argument  was  not  contained 
in  the  above  line  of  reasoning,  which  therefore  is  in- 
efficacious and  inconclusive.  And,  in  general,  argument 
to  prove  that  money  ought  to  be  stable  in  cost-value  or 
esteem -value  is  conspicuous  in  the  pages  of  the  gold 
advocates  chiefly  by  its  absence.     An  occasional  word 


NATURE    OF   THE    ARGUMENTS  299 

appears  now  and  then  assuming  that  money  ought  to  be 
so,  and  asserting  that  money  ought  to  be  stable 
in  exchange -value  only  when  there  is  no  progress; 
or  a  mere  drawing  of  the  distinction  between  a  station- 
ary and  a  progressive  period  is  treated  as  if  it  must  of 
itself  illuminate  the  correctness  of  their  position.  But 
argument  proper  to  establish  and  confirm  their  position 
can  be  gathered  only  piecemeal  from  scattered  state- 
ments, as  it  is  hardly  given  in  full.  Yet  it  is  only  in 
case  such  argument  can  be  successfully  carried  through, 
that  there  is  any  need  of  seeking  to  prove,  or  to  dis- 
prove, that  gold  has  shown  itself  stable  in  such  value. 
Ou  the  other  hand,  attempts  to  prove  that  money  ought 
t^  be  stable  in  exchange -value  have  generally  been  made 
by  the  best  of  the  bimetallists;  but  their  attempts  have 
frequently  lacked  force  through  omission  to  notice  that 
this  needs  to  be  proved  especially  for  periods  of  progress 
and  in  opposition  to  the  doctrine  of  stability  in  cost- 
value  or  esteem -value.  The  only  excuse  for  this  omis- 
sion is  the  want  of  form  given  to  that  doctrine  by  its 
own  advocates. 

§5.  Equally  illogical  is  it  to  argue  from  cheapening 
in  the  sense  of  falling  labor-cost  of  production  to 
cheapening  in  the  sense  of  falling  prices.  This  argu- 
ment has  appeared  in  two  shapes.  It  is  sometimes 
argued  that  with  improved  production  the  fall  of  prices 
is  inevitable,  and  therefore  it  is  idle  to  complain  of  it, 
or  that  to  succeed  in  preventing  a  fall  of  prices  would 
be  to  succeed  in  preventing  improved  production.  This 
involves  that  money  must  necessarily  be  stable  in  cost- 
value^  which,  seeing  that  the  material  upon  which 
money  is  generally  based  is  a  commodity,  like  all  other 
commodities,  subject  to  alteration  in  the  cost  of  its  pro- 


300  TOWARD   A   SOLUTION 

duetion  and  in  its  supply,  is  absurd.  Then  it  is  argued 
that  because  cheapening  of  cost  is  a  good  thing,  there- 
fore cheapening  of  price  is  also  a  good  thing.  Tliere  is 
nojieeessary  consequence  here,  but  only  a  verbal  quibble 
in  associating  money- cost  with  labor- cost.  It  is,  of 
course,  a  good  thing  that  all  commodities  should  fall  in 
cost -value.  But  if  the  prices  of  commodities  are  to  fall 
in  agreement  with  the  falls  in  their  cost-values,  the 
commodity  Avhich  is  used  as  the  material  of  money  must 
be  an  exception  to  this  general  rule,  and  a  good  reason 
ought  to  be  forthcoming  to  show  why  it  should  be  such 
an  exception.  If  such  a  reason  is  discovered,  the  desire 
for  prices  to  fall  with  the  fall  in  cost -values  is  because 
of  this  reasoD,  and  not  because  it  is  a  good  thing  for 
cost-values  to  fall.  The  error  in  the  argument  is  pre- 
cisely that  it  attempts  to  do  away  with  the  need  of  the 
further  reason  by  confounding  a  falling  of  prices  with 
the  cheapening  of  cost  of  production.  It  is  exasperating 
to  see  persons  who  ought  to  know  better  make  use  of 
this  misleading  argument.  The  fact  that  so  many 
would-be  economists  have  of  late  used  it,  can  only  be 
explained  either  by  their  being  themselves  duped  by  the 
fallacy  in  it  or  by  their  being  willing  to  commit  the 
sophistry  of  imposing  it  upon  others. 

§  6.  As  the  contest  between  the  two  rival  value 
claimants  has  above  been  shown  not  to  be  a  mere  logom- 
achy, so  it  is  not  a  mere  matter  of  convenience.  It  is 
absurd  for  persons  who  have  never  tried  seriously  to 
measure  the  variations  of  the  general  exchange -value  of 
money,  or  to  work  out  the  theory  of  the  method  for 
making  such  measurement,  to  affirm  that  the  measure- 
ment of  general  exchange -value  is  impossible  and  then 
to  argue  that  we  should  turn  away  from  this  hopeless 


NATURE   OF   THE    ARGUMENTS  301 

undertaking  and  seek  to  measure  the  esteem -value  or 
the  cost -value  of  monej'  and  desire  to  have  money  stable 
in  such  value.  Especiall}'  absurd  is  it  if  in  their  at- 
tempt to  measure  either  of  those  values,  they  meet  with 
no  greater  success  than  has  yet  been  attained  in  measur- 
ing general  exchange- value, —  and  most  especialh-  so  if 
in  the  attempted  measurement  of  one  of  those  values,  to 
repeat,  they  are  confronted  with  almost  exactly  similar 
difficulties,  with  addition  of  new  ones.  As  a  matter  of 
fact,  even  the  conception  of  stability  of  esteem -value 
has  not  yet  been  determined,  and  much  less  has  the 
method  been  developed  of  measuring  it,  or  even  of 
measuring  cost -value;  while  the  conception  of  general 
exchange -value  is  perfectly  definite,  and  the  method  of 
measuring  it  has  been  brought  near  to  perfection  in 
theory,  though  not  yet  so  well  applied  in  practice. 
Hence  the  argument  of  ease  is  rather  on  the  side  of 
wanting  money  to  be  stable  in  exchange-value.  But 
such  argument  is  wholly  unscientific.  Our  convenience 
in  making  the  measurement  has  nothing  to  do  with  the 
question.  Matters  of  much  greater  importance  may  de- 
termine the  question,  and  then  if  the  more  difficult  kind 
of  value  to  measure  be  the  one  decided  upon,  nothing  is 
left  us  but  to  buckle  down  to  the  work  of  measuring  it 
and  then  of  seeking  some  method  of  obtaining  stability 
of  money  in  it. 

§7.  It  is  evident,  also,  that  in  our  subject  little  can 
be  gained  by  appeal  to  authority.  Yet,  very  curiously, 
appeal  to  authoritj'  is  more  frequently  made  in  this  sub- 
ject than  in  almost  any  other  in  political  economy. 
Such  appeal  is  itself  an  indication  of  dearth  of  sound 
and  sufficient  independent  reasoning  on  the  subject  in 
which    it    is   prevalent;     and    similar    dearth   may  be 


302  TOWARD  A   SOLUTION 

expected  in  the  earlier  authors  relied  upon.  Now  a 
result  obtained  from  the  preceding  historical  survey  and 
systematic  review  is  the  showing  that  the  array  of 
authorities  on  all  sides  of  the  question  is  almost  equally 
great.  Nor  are  we  helped  by  appeal  to  the  greatest 
economists  alone;  for  these,  such  as  Adam  Smith, 
Ricardo,  J.  B.  Say,  J.  S.  Mill,  Roscher,  Chevalier, 
Jevous,  F.  A.  Walker,  and  others,  whose  greatness  is 
manifested  by  the  zeal  they  have  shown  for  developing 
all  problems  in  political  economy  and  is  founded  upon 
the  clearness  and  completeness  with  which  they  have 
elucidated  and  established  many  of  its  most  important 
theorems,  have  precisely  in  our  subject  shown  weakness 
of  argument  and  confusion  of  ideas.  Only  a  few  have 
been  clear  and  consistent,  such  as  the  early  Italian 
economists  and,  among  the  living.  Professor  Walras, — 
and  all  these,  it  is  noticeable,  on  the  side  of  stability  of 
money  in  exchange -value.  Others  have  been  confused 
about  the  stability  of  money  in  exchange -value  by 
admitting  wages  into  the  lists  along  with  the  prices  of 
commodities;  while  those  who  advocate  stability  of 
money  in  cost-value  or  in  esteem-value,  have  confusedly 
made  use  of  the  prices  of  commodities  along  with  wages, 
or  have  mixed  up  wages  with  the  labor -cost  of  produc- 
tion, or  have  jumped  from  the  one  to  the  other.  In  this 
subject  political  economy  needs  a  thorough  overhauling. 
§8.  The  argument  as  to  which  kind  of  value  money 
should  be  stable  in,  or  as  to  which  standard  should  be 
adopted  for  judging  the  goodness  of  money  by,  must 
stand  on  its  own  merits.  It  njvturally  falls  into  two 
parts.  The  one  is  by  consideration  of  the  functions  of 
money.  The  other  is  by  consideration  of  the  good  or 
evil  which  results  from  money  functioning  in  the  differ- 


ARGUMENT  FROM   FUNCTIONS  303 

ent  wa.vs  in  question.  The  former  is  more  theoretical 
and  a  priori;  the  latter,  more  practical  and  a  posteriori. 
The  former  must  consider,  among  the  functions  of 
raone}',  especially  two:  its  function  as  measure  of  value 
through  the  course  of  time,  and  its  function  as  store 
of  value  through  the  course  of  tiuie.  Here_also  the 
second  treatment  is  more  practical  than  the  first.  The 
latter  must  consider  the  question  of  good  and  evil  partly 
by  general  argumentation  from  analysis  of  economic 
conditions  in  order  to  elicit  what  are  probably  the  good 
or  evil  results  of  money  functioning  in  one  way  or 
another,  and  partly  by  historical  survey  of  different 
periods  in  various  countries  when  and  where  money  has 
functioned  in  one  way  or  another.  The  second  is  a 
wholly  empirical  enquiry,  necessarily  imperfect  because 
of  little  careful  observation  of  experience  that  is  past 
and  gone  and  the  impossibility^  of  experimenting  as  we 
please.  The  first,  again,  is  more  theoretical,  though 
based  upon  experience. 

The  present  work  is  mainly  analytical  and  suggestive, 
and  its^purpose  is  not  to  carry  out  the  argument  for  any 
of  the  standards.  But  it  would  be  incomplete  without  a 
review  of  the  arguments  themselves  —  of  their  nature 
and  their  requirements,  with  some  indication  of  their 
validity. 


CHAPTER   III 

ARGUMENT  FROM  THE  FUNCTIONS  OF  MONEY 

§1.    The  argument  by  consideration  of  the  functions 
of  money  most  conveniently  begins  with  its  function  as 


304  TOWARD   A    SOLUTION 

the  measure  of  value.  Through  its  function  as  medium 
of  exchange  money  acquires  the  function  of  measuring 
relative  values  at  any  given  lime  and  place.  Being  so 
used  everywhere  and  continuously,  it  further  acquires 
the  function  of  measuring  relative  values  throughout 
space  and  through  the  course  of  time.  The  relative 
values  it  so  measures  are,  directly,  exchange -values. 
But  they  are  also  relative  esteem -values.  Consequently 
the  immediate  inference  that,  in  the  words  of  a  contro- 
versialist, "money,  through  its  being  the  medium  of 
exchange,  is  the  measure  of  exchange- value,"*  and 
therefore  ought  to  be  stable  as  such,  though  correct,  is 
not  convincing,  since  through  that  function  it  is  equally 
a  measure  of  relative  esteem -values,  and  the  need  of  its 
stability  in  esteem -value  might  almost  equally  well  be 
inferred.  On  the  other  hand,  another  controversialist, 
a  politician,  has  recently  said  that  the  late  fall  of  prices 
is  proper  and  legitimate,  since  it  "measures  man's  vastly 
increased  command  over  the  forces  of  nature. "t  This  is 
the  sentiment  we  have  seen  also  entertained  by  Malthus 
and  McCulloch  and  others,  and  in  one  passage  expressed 
by  Professor  Marshall.  It  means  that  in  the  opinion  of 
these  authors  the  measurement  of  cost-value  or  of 
esteem -value  is  of  more  real  interest  and  importance 
thj,n  the  measurement  of  exchange -value,  and  therefore 
it  would  be  more  convenient  if  money  were  stable  in 
either  of  those  values  rather  than  in  exchange -value, 
since  it  would  then  directly  serve  as  the  measure  of  the 
one  or  the  other  of  those  values.  The  question  is 
properly  a  statistical  one.  For  the  purposes  of  statis- 
tics, is  it  more  important  that  money  should,  by  being 

*Shibloy,  op.  cit.  p.  17. 
tMcCleary,  op,  cit.  p.  12. 


ARGUMENT  FROM   FUNCTIONS  305 

stable  in  the  one  or  in  the  other  kind  of  value,  serve  as 
the  measure  of  this  or  of  that  kind  of  value  ? — and  of 
which  kind  of  value  is  it  more  important  that  money 
should  be  the  measure?  Little  examination  will  show  that 
not  much  help  for  deciding  our  problem  comes  from  this 
treatment  of  it,  but  that,  if  anything,  the  convenience 
inclines  iu  favor  of  money  being  the  measure  of 
exchange -value. 

That  money  should  measure  for  us  changes  in  the 
cost -values  and  in  the  esteem-values  of  commodities, 
means  that  we  want  to  know  whether  we  are  making 
progress  in  the  conquest  of  the  material  world.  Now, 
for  this  purpose  the  measurement  of  the  general  ex- 
change-value of  money  by  means  of  an  average  of  the 
variations  of  prices  is  as  necessary  as  a  measurement  of 
the  cost-value  or  of  the  esteem-value  of  money.  For 
suppose  money  were  stable  in  esteem -value,  and  the 
average  of  wages  or  of  earnings  in  general,  or  still  more 
generally,  of  incomes,  were  constant  (which  can  be 
learned  only  by  examining  particular  variations  and 
averaging  them) ;  then  the  increase  in  real  wealth  could 
be  ascertained  only  by  finding  the  increase  in  the 
purchasing  power  of  the  constant  average  incomes,  diat 
is,  by  measuring  the  variation  of  the  general  exchange- 
value  of  money.  Or  suppose  money  were  stable  in  cost- 
value,  somehow  determined,  and  the  variation  of  the 
price  of  every  commodity  constantly  reflected  its  vari- 
ation in  this  value:  then,  indeed,  to  know  the  progress 
of  mankind  in  acquiring  any  one  commodity,  we  should 
merely  have  to  consult  its  price.  But  in  economics  we 
are  always  interested  to  know  general  results,  which  can 
be  obtained  only  by  averages.  To  know,  then,  the 
advance  of  mankind  in  power  over  nature,  we  should 


306  TOWARD   A    SOLUTION 

have  to  average  the  falls  of  prices,  that  is,  to  measure 
the  variation  of  the  general  exchange -value  of  money. 
Yet  in  both  these  cases,  the  measurement  of  its  general 
exchange -value  is  not  the  only  measurement  required  in 
regard  to  money.  In  the  former  case,  as  above  indi- 
cated, we  should  have  to  average  wages,  or  earnings,  or 
incomes,  in  order  to  know  that  they  are  on  the  average 
stable.  Now,  instead,  suppose  money  were  stable  in 
exchange -value,  as  learned  by  averaging  prices:  it  is 
plain  that  w^  could  then  measure  man's  increase  in  real 
wealth  directly  by  the  measurement  of  the  increase  in 
average  income.  And  would  not  this  be  the  more  desir- 
able of  the  two  double  operations?  Again,  in  the  second 
of  the  above  suppositions,  it  is  easy  to  see  how  con- 
venient it  would  be  to  measure  man's  increase  in  power 
over  nature  by  the  fall  of  prices,  on  the  hypothesis  of 
money  being  stable  in  cost-value.  But  it  must  not  be 
forgotten  that  for  this  purpose  we  should  have  to 
measure  the  cost- value  of  money,  by  measuring  the  cost 
of  production  of  its  material,  in  order  to  know  that 
money  is  stable  in  this  way.  And  in  order  to  make  this 
measurement  serviceable  as  a  measure  of  the  cost  of 
acquisition  of  money  to  the  mass  of  mankind,  who  are 
engaged  in  other  pursuits  than  mining  the  precious 
metal,  we  should  have  to  measure  the  fall  in  the  cost 
of  production  of  every  commodity,  to  see  whether  the 
fall  of  its  price  accurately  corresponds.*     But  if  money 


*As  a  mathematical  fact,  if  the  cost-of -production  theory  of  value 
were  universally  true,  it  would  be  necessary  to  measure  the  variation 
in  the  cost  of  production  either  of  money  alone  or  of  any  one  commodity 
(comparing:  that  of  the  latter  with  its  price)  in  order  to  calculate  the 
variation  of  the  cost-value  of  money  and  thence,  by  means  of  their 
prices,  the  variations  of  the  cost-values  of  all  commodities.  But  the 
cost-of-production  theory  is  not,  and  does  not  pretend  to  be,  universally 


ARGUMENT  FROM  FUNCTIONS  ZOl 

were  stable  in  exchange -value,  we  could  make  this  latter 
inquiry  into  the  falls  of  cost  in  the  cases  of  all  com- 
niodities  just  as  well  as  when  money  is  stable  in  cost- 
value.  No  real  or  important  advantage,  therefore,  is 
obtained  for  statisticians  by  money  remaining  stable  in 
cost- value,  or  in  esteem- value,  over  what  would  be 
obtained  by  its  remaining  stable  in  exchange -value. 
To  be  sure,  if  statisticians  were  able  to  show,  by  their 
investigations,  that  money  has  remained  stable  in  either 
of  the  labor- values,  this  would  enable  us  immediately  to 
conclude  from  the  general  fall  of  prices,  when  this  is 
examined  and  averaged,  the  increase  in  power  over 
nature  and  advance  in  wealth,  although,  in  the  one 
case,  such  inference  would  not  be  accurate  on  account 
of  prices  not  exactly  corresponding  with  improvements 
in  production.  We  might,  then,  learn  of  the  increase 
much  better  by  statisticians  directly  informing  us  of  it, 
after  their  investigations  into  falls  of  costs  of  production. 
Again,  for  the  ordinary  man,  the  casual  mention  of  a 
price  in  a  historical  narrative  about  past  events  would 
seem  to  convey  more  meaning  if  it  expressed  the  ex- 
change-value or  purchasing  power  of  the  commodity 
(which  it  would  do  if  money  had  remained  stable  in 
exchange -value)  than  if  it  expressed  the  cost -value,  or 
the  esteem -value,  of  the  commodity  (which  it  would  do 
if  money  had  remained  stable  in  cost -value  or  in  esteem- 


true,  and  therefore  a  general  measurement  of  the  conditions  in  mar.y 
commodities,  as  described  in  the  text,  is  imperative.  The  single  meas- 
urement of  the  cost  of  production  of  the  money-material,  as  recom- 
mended by  Loria,  may  be  sufficient  for  otlier  purposes  (as  to  satisfy  the 
demand  for  repayments  in  equal  cost-value)  but  not  for  the  statistical 
purpose  under  consideration.  The  need  of  the  wider  measurement  has 
been  recognized  by  statisticians  and  economists,  who  have  usually 
extended  their  survey  of  costs  to  as  many  commodities  as  possible. 


308  TOWARD    A    SOLUTION 

value) ;  for,  in  the  former  case,  it  would  more  closely 
mark  some  local  or  temporary  peculiarity  iu  the  com- 
modity compared  with  all  commodities,  while,  in  the 
latter  case,  this  would  be  shown  only  if  we  additionally 
knew  the  then  normal  price.  Also,  with  money  stable 
in  exchange -value,  the  mention  of  the  income  of  some 
historical  personage  would  indicate  his  command  over 
commodities,  while,  if  money  had  been  stable  in  esteem- 
value  so  that  the  general  level  of  incomes  would  have 
been  stable,  such  mention  of  a  past  income  would 
merely  show  that  it  placed  the  recipient  in  the  same 
relative  position  of  wealth  in  comparison  with  the  rest 
of  the  coramunit}^  as  an  equal  income  would  now  place 
its  recipient.*  Former  stages  of  real  wealth  and  our 
advance  would  thus  apparently'  be  more  clearly  indicated 
by  increase  of  general  incomes  than  by  fall  of  general 
prices.  Still,  the  advance  may  be  shown  in  either  of 
the  two  ways,  so  that  in  this  aspect  of  the  problem  it  is 
not  of  much  consequence  in  which  of  the  kinds  of  value 
money  were  stable,  although  the  balance  seems  to  tip 
slightly  in  favor  of  its  being  stable  in  exchange-value. 
§2.  In  the  monetary  function  of  storing  value  the 
aspect  of  the  question  is  quite  different.  Here  it  is  of 
vast  importance  to  individual  men,  to  classes  of  societj', 
to  society  at  large,  whether  money  be  stable  in  one  or  in 
another  kind  of  value.  In  primitive  states  of  society 
money  is,  among  other  things,  used  as  an  actual  store  of 
value,  in  hoards  or  treasures.  In  these,  no  current  use 
is  made  of  the  store  (except  in  some  cases  for  ornament 

*As  a  matter  of  fact,  in  past  centuries,  prices,  instead  of  being 
higher,  as  were  costs,  were  in  general  much  lower  than  they  are  now. 
In  statistics  we  do  not  suffer  from  this  fact,  but  only  from  the  irregu- 
larity of  the  exchange-vahie  of  money  at  dilferent  periods  and  in  differ- 
ent regions,  and  the  difficulty  of  tracing  this  irregularity. 


ARGUMENT  FROM   FUNCTIONS  309 

and  displaj-),  and  so  there  is  no  gain  from  interest.  In 
more  advanced  societies  tlie  store  is  loaned  to  others 
who  make  use  of  it,  and  pay  interest  for  its  use,  and 
later  return  the  store.  This  operation  is  performed  not 
only  in  renting  and  hiring,  with  which  we  are  not  con- 
cerned, but  also  in  loans  of  money.  In  loans  of  money 
the  element  of  real  importance  in  the  return  of  the 
principal  is  not  so  much  the  return  of  equal  weight  of 
similar  material,  as  the  return  of  equal  value.  Now, 
what  is  this  "  value  "  the  return  of  which  is  contemplated  ? 
The  question  of  justice  would  seem  to  be  secondary  to 
this  question  about  the  nature  of  a  monetary  loan,  or 
in  general,  of  a  contract  for  future  delivery  of  money; 
for  justice  demands  that  that  should  be  returned  which 
is^  intended.  Unfortunately,  in  the  vast  majority  of 
monetary  transactions,  the  parties  themselves  have  no 
clear  idea  of  what  kind  of  value  they  are  desiring  the 
return  of.  Therefore  the  question  .of  justice  becomes 
the  primary  one,  and  converts  into  this  form:  What 
kind  of  value  is  it  just  that  people  in  general  should  ex- 
pect the  return  of,  equal  to  that  which  was  loaned,  apart 
from  interest,  or  should  contract  for  ?  * 


*The  followers  of  Lowe,  in  advocating  the  making  of  loans  with  di- 
rect reference  to  the  multiple  commodity  standard,  virtually  say  that 
contracts  ought  to  be  made  to  call  for  payment  in  constant  exchange- 
value.  If  contracts  were  so  made,  justice  would  simply  demand  that 
they  should  be  fulfilled  as  accurately  as  possible.  But  contracts  can 
also  be  framed  with  reference  to  the  labor  standard;  and  if  such  con- 
tracts were  made,  justice  would  likewise  simply  demand  that  they  should 
be  fulfilled  as  accurately  as  possible.  Now,  before  any  one  recommends 
the  making  of  contracts  in  either  of  these  ways,  a  prior  question  exists 
as  to  which  of  these  ways  is  the  more  just  to  both  the  parties  concerned 
(and  also  as  to  which  is  the  more  politic,  or  the  better  for  the  community 
at  large  to  insist  upon  — an  aspect  of  the  question  which  will  be  treated 
of  later).     Most  of  the  followers  of  Lowe  have  neglected  to  consider 


310  TOWARD   A    SOLUTION 

Now,  money  is  not  labor,  but  a  material  thing  like 
commodities.  It  is  therefore  comparable,  nut  with 
labor,  but  with  commodities.  When,  in  primitive  so- 
cieties, a  person  lays  up  a  store,  or  hoard,  or  treasure, 
consisting  of  the  very  commodities  he  expects  later  to 
consume,  he  is  storing  power  over  commodities,  and  is 
judging  his  future  wealth  hy  the  commodity  standard. 
It  may  be  that  instead  of  this  he  stores  only  some 
special  commodity,  with  intention  of  later  exchanging 
this  for  what  he  shall  desire  to  consume,  and  he  may 
even  store  something  which  he  expects  —  and  he  may 
choose  it  because  he  expects  it  —  to  rise  in  purchasing 
power  over  other  commodities.  But  now  it  is  plain  that 
he  is  doing  something  else  than  merely  storing,  or  laying 
up,  for  future  use.  He  is  engaging  in  a  mercantile 
speculation,  for  gain,  with  possibility  of  loss  in  case 
the  thing  should  disappoint  his  expectation.  And  this 
idea  of  probable  gain  shows  that  he  is  expecting  more 
than  a  future  equivalent,  so  that  the  only  value  that  is 
properly  stored  is  still  the  commodity- value,  or  ex- 
change-value, the  increment  being  profit.  In  a  more 
advanced  society  it  is  regularly  money  that  is  stored 
when  the  idea  is  not  to  risk  profit  and  loss;  and  when, 
instead  of  being  hoarded,  it  is  loaned  out,  the  increase 
or  gain  that  is  supposed  to  be  procured,  as  pay  for  its 
use,  is  the  interest,  while  the  principal  is  supposed  to 
remain  of  equal  value.  This  value,  then,  would  seem 
properly  still  to  be  commodity-value,  or  exchange- 
value.  Thus  the  nature  of  all  storing  of  a  material 
thing  would  seem  to  be  that  it  is  a  store  of  exchange- 
value;   and  the   loan  of   such  a  store  would  naturally 

this  prior  question,  and  so  have  failed  to  lay  a  solid  foundation  under 
their  system. 


ARGUMENT  FROM   FUNCTIONS  311 

seem  to  call  for  return  in  an  equal  exchange -value,  any 
other  return,  apart  from  the  agreed-upon  interest, 
seeming  to  indicate  profit  or  loss. 

§3.  Is  this  conclusion  altered  when  between  the 
contract  and  the  settlement  there  is  a  general  advance 
in  prosperity  through  improved  production!  It  is  diffi- 
cult to  show  that  it  is.  In  hoarding  itself  it  is  no 
objection  to  the  commodity  used  as  the  store  of  value 
that  it  should  fall  in  cost- value  or  in  esteem -value,  pro- 
vided it  does  not  fall  more  than  other  things,  that  is, 
provided  it  does  not  fall  in^exchange- value.  Of  course, 
if  the  hoarder  could  hit  upon  the  commodity  that  falls 
least  in  the  labor -values  and  that  therefore  rises  most 
in  exchange -value,  he  would  consider  himself  fortunate; 
but  at  the  commencement,  while  choosing,  the  chance 
of  his  adopting  a  commodity  that  will  fall  more  in  the 
labor-values  is  as  great  as  the  chance  of  his  adopting 
one  that  will  fall  less,  and  so  he  may  be  content  if  he 
strikes  the  mean.*  In  a  loan,  however,  there  are  two 
parties,  whose  interests  are  opposed.  For  in  a  loan, 
although  the  hoarder's  place  is  taken  by  the  creditor, 
yet,  in  a  way,  the  debtor  may  also  be  viewed  as  a 
hoarder,  or  storer,  since  in  investing  his  borrowings  hfi 
ahvays  seeks  to  keep  his  capital,  as  it  is  said,  intact, 
that  is,  he  still  wants  it  to  store  equal  value  for  him. 
And  now  for  both  these  parties  not  to  lose,  they  must 
together  strike  the  mean;  for,  if  they  hit  upon  the  com- 
modity that  falls  in  the  labor-values  at  the  same  average 
rate  with  all  other  commodities,  and  so  is  stable  in  ex- 


*  If  all  commodities  fell  equally,  and  if  money  were  only  a  com- 
modity, the  hoard  would  have  to  fall  in  the  labor-values  aad  would  have 
to  be  stable  in  exchange-value.  Of  this  the  hoarder  could  not  possibly 
complain;  for  he  has  lost  nothing. 


312  TOWARD   A   SOLUTION 

change -value  (or  if  they  use  money,  and  money  behaves 
in  this  way),  they  may  both  be  content;  but  if  they  hit 
upon  an  article  that  falls  more  in  the  labor- values  than 
the  rest,  the  debtor  will  rejoice  and  the  creditor  grieve, 
and  reversely,  if  the}'  hit  upon  one  that  falls  less,  the 
creditor  will  be  pleased  and  the  debtor  would  seem  to  have 
ground  for  complaint.  Therefore,  in  a  state  of  general 
progress,  that  is,  when  all,  or  most,  commodities  are 
falling  in  the  labor-values,  if  money  be  made  stable  in 
these  values,  the  use  of  such  money  in  loans  is  the  use 
of  an  article  even  better  for  the  creditor  and  worse  for 
the  debtor  than  the  article  last  considered,  which  fell 
less  in  these  values,  since  money  does  not  now  fall  at  all 
in  these  values.  Such  money,  then,  would  store  value 
with  undue  favor  to  the  creditors  and  with  undue  dis- 
favor to  the  debtors.  Impartiality  of  money  both  to 
creditors  and  to  debtors  requires  that  it  must  fall  in  the 
labor- values  at  the  same  average  rate  with  commodities 
i^^genei-al  (and  reversely,  rise  at  the  same  average  rate 
with  them,  in  case  of  retrogression),  that  is,  must  be 
stable  in  exchange-value.  In  other  words,  stability  of 
exchange -value  is,  in  money,  the  only  quality  that  can 
reconcile  the  opposing  interests  in  a  loan. 

The  pretension  put  forth  in  favor  of  the  creditor 
dqes^not  seem  to  stand  up  against  criticism.  The  credi- 
tor, qua  creditor,  we  may  repeat,  is  inactive;  whereas 
the  borrower,  qua  borrower,  is  genei-ally  a  producer,  the 
purpose  of  his  borrowing  being  to  employ  the  borrowed 
capital  in  pi-oductive  enterprises.  Now,  the  very  idea 
that  the  creditor,  qua  creditor,  should  share  in  the  ad- 
vantage of  progress,  seems  to  mean  that  the  creditor 
should  get  some  of  the  increased  value  of  the  borrower's 
product — that  is,  that  he  should  receive  more  value  than 


ARGUMENT  FROM   FUNCTIONS  313 

he  gave,  additional  to  the  interest:  else  how  would  he 
benefit  by  the  progress  ?  And  the  only  ground  for  this 
claim  seems  to  be  the  idea  that  as  the  borrower  has  pro- 
duced more,  the  creditor  should  get  more.  But  this  is 
contrary  to  the  original  idea  that  the  contract  should  be 
paid  in  the  same  value  as  received.  Hence  the  claim  of 
the  creditor  to  a  greater  return  must  be  put  on  the 
ground  that,  on  account  of  the  progress,  the  larger 
quantity  of  commodities  restored  is  only  of  the  same 
value  as  the  smaller  quantity  over  which  command  was 
loaned.  And  for  this  purpose  is  invoked  the  idea  of 
esteem -value.  Now,  when  there  is  advance  in  the  pro- 
ductive arts  applied  by  the  borrowers,  unquestionably 
the  esteem -value  of  the  individual  products  falls  in  the 
eyes  of  the  producing  borrowers,  who  are  thereby  grow- 
ing richer.  But  it  does  not  fall  iu  the  eyes  of  the  credi- 
tors unless  somehow  they,  too,  are  growing  richer; 
which  they  cannot  do  in  their  capacity  merely  as  credi- 
tors except  by  getting  a  share  in  the  increase  belonging 
to  their  debtors.  Thus  the  claim  of  the  creditors  to 
repayment  in  equal  esteem -value  is  a  demand  that  the 
esteem -value  of  individual  goods  should  be  equalized 
between  themselves  and  their  debtors  —  that  it  should 
not  be  permitted  to  fall  faster  to  their  producing 
debtors,  however  active,  than  to  themselves,  however  idle. 
It  is  a  requisition  to  take  away  from  the  total  esteem- 
value  iu  the  hands  of  the  debtors  and  to  add  to  the  total 
esteem -value  in  their  own  handSj  in  order  that,  by 
lessening  the  fall  of  individual  esteem -values  to  the 
debtors  and  by  causing  a  fall  of  them  to  themselves,  the 
resultant  conditions  may  be  made  even.  But  as  the 
equality  desired  comes  only  after  the  increased  repay- 
ment—  only  after  the  claim  is  allowed, —  the  claim  of 


314  TOWARD    A    SOLUTION 

the  creditors  to  repayment  in  equal  esteem -value  is 
virtually  a  claim  to  repayment  in  equal  esteem -value  to 
the  debtors,  ignoring  the  fact  that  if  they  were  repaid 
in  equal  exchange -value,  this  would  still  be  equal 
esteem-value  to  themselves  qua  creditors  —  that  without 
the  equalization  desired  by  them  there  already  exists  an 
equality,  not  only  of  exchange -value  but  also  of  esteem- 
value.  Their  claim  is,  therefore,  to  a  greater  esteem- 
value  to  themselves  than  what  they  loaned.  The 
principle  of  justice  is,  then,  violated,  on  the  part  of  the 
creditors.  Still,  it  may  be  asked,  is  it  not  also  violated 
by  the  debtors  if  they  repay  in  equal  exchange -value 
but  in  what,  to  them,  is  less  esteem -value  ?  The  answer 
must  be  negative,  because  the  borrowers  are  themselves 
the  causes  of  the  equal  exchange -value  becoming  a  less 
esteem-value  to  themselves.  To  give  gain  to  creditors 
on  account  of  subsequent  improvements,  is  plainly  to 
show  them  favor.  But  to  give  to  debtors  the  gains 
coming  from  their  own  exertions,  is  not  to  show  them 
favor.  Favoritism  does  not  consist  in  giving  one  the 
increase  of  one's  own  product.  Really,  a  money  stable 
in  exchange -value  merely  leaves  the  increase  in  the 
hands  of  those  who  have  produced  it,  whereas  a  money 
stable  in  a  labor- value  positively  takes  it,  in  whole  or  in 
part,  from  them  and  makes  a  present  of  it  to  others 
who  have  not  produced  it. 

This  answers  the  question :  Which  of  the  two 
parties  to  a  loan  deserves  the  increase  arising  from 
improvements?  Yet  some  more  comments  may  not  be 
amiss.  Justice  would  seem  to  require  that  profit  should 
come  either  only  from  work,  or  if  from  speculation, 
then  only  coupled  with  the  risk  of  loss.  But  the  person 
who  lends  money,  ceases  not  only  to  work  with  the  aid 


ARGUMENT   FROM   FUNCTIONS  315 

of  what  he  could  convert  that  money  into,  but  also  to 
speculate  with  it,  as  he  guards  himself  from  loss  by 
requiring  what  he  deems  sufficient  security,  or  if  he 
admits  some  risk,  he  insures  himself  by  higher  rate  of 
interest.  He  thus  is  inactive  qua  creditor,  that  is,  as 
regards  the  money  or  capital  parted  with,  however 
much  he  may  work  or  speculate  in  other  ways  or  with 
other  capital.  On  the  other  hand,  the  person  who 
borrows  money  is  generally  one  who  works,  or  who 
speculates  with  the  aid  of  what  he  converts  it  into. 
Therefore  whatever  profit  may  accrue  on  the  labor,  or 
speculation,  so  aided,  would  seem  to  go  of  right  to  the 
borrower,  as  also  any  loss  ought  to  fall  on  him  alone. 
And  the  fact  that  an  invention  may  intervene,  helping 
the  worker,  does  not  seem  to  give  the  lender  any  right 
to  share  in  his  greater  profit,  nor  even  to  share  in  the 
greater  profit  of  the  speculator,  if  he  succeeds,  since 
such  an  invention  may  also  cause  him  los^.  The  worker, 
too,  as  an  undertaker  of  new  industry,  is  in  a  way  a 
speculator,  and  runs  risks,  and  may  lose  as  well  as  gain 
by  the  new  invention.  And  even  if  the  inventor  him- 
self, or  the  introducer  of  an  improved  method  of  pro- 
duction, be  a  creditor,  it  is  not  in  his  capacity  as 
creditor  that  he  does  so.  In  fact,  by  being  a  creditor, 
that  is,  by  parting  with  his  capital,  he  may  have 
weakened  his  power  to  introduce  the  improvement.  It 
is,  therefore,  not  in  the  capacity  of  creditor  that  any- 
one may  deserve  gain  coming  from  improvements. 
Also  it  is  not  in  the  capacity  of  creditor  that  anyone 
may  deserve  loss  coming  from  the  abandonment  of 
improvements  or  from  the  exhaustion  of  a  source  of 
supply.  The  former  of  these  evils  would  mean  mis- 
management on  the  part  of   the  borrowers;    and   the 


316  TOWARD   A    SOLUTION 

latter  would  be  a  misfortune,  which  is  one  of  the  risks 
they  must  take  into  account  in  their  speculations. 

§4.  But  it  is  said  that  as  progress  cannot  take  place 
without  the  use  of  capital,  therefore  the  lenders  of 
capital  have  contributed  to  progress,  and  consequently 
they  have  a  right  to  partake  of  its  increased  benefits. 
This  way  of  putting  the  matter  is  hardly  correct.  The 
lenders  have  indeed  given  opportunity  for  the  improve- 
ments—  and  for  their  giving  this  opportunity  they  get 
pay  in  interest.  But  whether  the  borrowers  take 
advantage  of  this  opportunity  or  not,  is  wholly  an  affair 
of  their  own,  and  is  purely  accidental  to  the  lenders. 
If  borrowers  in  general  do  not  make  advance  with  the 
aid  of  the  capital  put  at  their  disposal,  it  is  admitted 
that  the  lenders  should  get  back  only  the  same  ex- 
change-value. But  if  the  borrowers  do  make  advance 
with  the  aid  of  the  capital  put  at  their  disposal,  what  is 
that  to  the  lenders?  The  lenders  have  acted  in  precisely 
the  same  way  whether  progress  is  made  or  not  —  they 
have  acted  in  lending,  and  then  have  remained  passive. 
They  have,  therefore,  no  more  contributed  to  the  prog- 
ress, if  progress  has  been  made,  than  they  have  con- 
tributed to  it,  if  there  has  been  none;  and  they  deserve 
no  more  in  the  former  case  than  it  is  admitted  they 
deserve  in  the  latter.  In  other  words,  the  subsequent 
actions  of  the  debtors  is  not  a  concern  in  the  loan.  If 
the  debtors  succeed  in  making  the  esteem -values  of 
individual  goods  fall  to  themselves  (by  producing  more), 
so  much  the  better  for  them.  The  creditors  have  no 
right  to  claim  that  the  esteem -values  of  the  goods  shall 
be  made  to  fall  to  themselves  also  (by  receiving  more), 
since  in  the  meanwhile  tliey,  qua  creditors,  have  done 
nothing  toward  this  result.     Therefore  the  debtors  are 


ARGUMENT  FROM  FUNCTIONS  317 

justified  in  repaying  their  loans  in  equal  exchange- 
value,  although  it  may  be  less  esteem -value  to  them- 
selves (which  merely  means  that  they  are  justified  in 
repaying  more  easily  on  account  of  the  improvements 
adopted  than  they  could  have  done  without  them,  and 
are  justified  in  not  giving,  and  should  not  be  required 
to  give,  any  of  their  advantage  to  their  creditors,  except 
what  may  be  bargained  for  in  advance  —  in  interest). 
And  the  creditors,  qua  creditors,  as  above  said,  have  a 
right  to  repayment  only  in  what  is  to  themselves,  as 
creditors,  without  intervening  exertion  (which  can  only 
be  made  in  some  other  capacity),  equal  esteem-value, 
that  is,  equal  exchange -value. 

In  the  argument  under  consideration  in  the  creditors' 
behalf,  there  is  the  confusion  to  which  attention  has 
already  been  drawn.  The  creditor  is  not  treated  merely 
as  a  party  to  a  given  loan,  but  as  a  member  of  a  class 
of  society  who  of  ten  do  perform  work  and  contribute  to 
progress,  and  who  therefore  deserve  to  partake  of  its 
benefits  —  and  who  no  doubt  do  partake  of  its  benefits 
in  other  ways  than  by  increase  in  the  exchange -value  of 
the  repayment  of  their  loans.*  But  the  question  before 
us  properly  is  whether  they  ought  to  partake  of  the 
benefits  actually  upon  their  lendings  —  that  is,  upon 
their  expressly  putting  away  from  themselves  the  power 
to  contribute  to  progress  by  the  aid  which  this  much  of 
their  capital  would  give  them.  Take  the  case  of  some 
great  inventive  genius,  like  many  now  living,  whose 
names   immediately  suggest   themselves.      Suppose   by 


•There  is  a  tendency  to  identify  creditors  alone  with  capitalists. 
But  creditors  are  capitalists  who  have,  pro  tanto,  parted  with  their 
capital.  Debtors  much  more  deserve  the  name,  since  they  are  the 
users  of  capital,  which  they  have  got  by  borrowing. 


318  TOWARD    A    SOLUTION 

middle  age  such  a  one  has,  by  his  exertions,  or  by 
inheritance,  acquired  a  fortune  of  a  million  dollars. 
Suppose  he  continues  to  make  inventions,  but  not  hav- 
ing occasion  to  use  the  whole  of  his  capital,  or  not  will- 
ing to  risk  it  all  upon  a  new  venture,  he  lends  out  half 
of  it  at  a  stipulated  rate  of  interest  and  emplojs  the 
other  half  in  his  own  work.  Whatever  farther  contri- 
bution he  now  makes  to  progress,  he  ought  to  benefit 
from  in  increased  profit  —  that  is,  increased  command 
over  commodities  —  upon  the  half  of  his  fortune  he  has 
devoted  to  his  business.  But  evidently,  if  other  men 
are  likewise  making  contributions  to  progress,  and 
among  them  his  debtors,  there  is  no  reason  why  he 
should  get  increased  profit,  or  increased  command  over 
commodities,  from  that  half  of  his  fortune, —  and  es- 
pecially not,  if  his  debtors  happen  not  to  be  contrib- 
uting to  progress,  or  if  they  happen,  as  they  may,  to 
be  suffering  from  the  contributions  made  by  himself 
and  the  others. 

Then  it  is  varyingly  said  the  creditor  deserves  a 
share  in  the  advance  of  prosperity  because  of  his  absti- 
nence. His  abstinence  from  self-indulgence,  his  willing- 
ness to  help  producers  by  loaning  them  his  money,  is 
one  of  the  factors  that  enable  the  producers  to  make 
progress.  Hence,  it  is  urged,  the  creditors  have  earned 
a  share  in  the  increasing  afiluence.  The  reply  is  similar. 
The  reward  for  abstinence  is  bargained  for  bj'  the 
creditors  in  the  interest  they  seek  to  get  from  loaning 
their  monej^  —  or  rather,  all  the  advantage  they  can  get 
from  their  position  as  owners  of  helps  to  production 
is  bargained  for  in   interest.*     Hence  this  reward,   or 


*  For  even  as  an  explanation  of  interest  the  abstinence  theory  is  a 
mistake.     It  if^nores  the  historical  fact  that  before  lending  came  into 


ARGUMENT  FROM    FUNCTIONS  319 

rather  gain,  should  be  paid  only  in  the  form  of  interest. 
Now,  if  there  is  progress,  and  if  there  is  prospect  of  con- 
tinued prosperity,  then,  even  with  money  stable  in  ex- 
change-value, there  is  greater  demand  for  capital  on  the 
part  of  producers,  and  lenders  may  demand  and  get  a 
higher  rate  of  interest,  than  when  there  is  no  progress, 
with  stable  exchange -value  of  money.  This  gain  is 
proper,  because  it  is  bargained  for,  and  willingly  con- 
ceded by  the  borrowers.  And  if  the  lenders  choose, 
they  may  abstain  from  spending  this  increment  and  may 
add  it  to  their  capital  and  thereby  continuously  augment 
its  purchasing  power  over  commodities,  as  it  would  grow 
of  itself  in  case  mouej^  were  rising  in  exchange -value 
(being  stable  in  cost -value  or  in  esteem -value), 
although  not  so  much,  with  equal  abstinence,  as  in  the 
latter  case.     Here  the  creditors  do  not  earn  the  increase 


vogue  there  was  hoarding  —  without  interest.  It  ignores  the  present 
fact  that  many  persons  are  possessed  of  so  much  wealth  that  they  simply 
cannot  consume  (enjoy)  it  at  once,  or  in  a  week,  or  in  a  niontli,  or  a 
year,  or  a  decade,  or  even  in  a  lifetime  (although  they  might  quicltly 
give  it  or  throw  it  away,  squander  it,  which  is  abstinence  of  another 
kind).  Abstinence  from  the  consumption  of  part  of  their  wealth  is  thus 
thrust  upon  them,  without  any  merit  on  their  part.  Also,  prudent 
people  with  small  fortunes  want  to  save  something  for  their  old  age,  or 
for  their  children,  whether  they  can  get  interest  or  not.  Thus  interest 
is  not  a  reward  for  abstinence,  but  it  is  a  clear  gain  to  the  owners  of 
capital,  increasing  their  fortune  to  them  and  to  their  posterity,  without 
labor.  It  is  an  inducement,  not  so  much  to  saving,  as  to  lending  one's 
savings,  which  without  it  would  remain  as  a  hoard,  although  it  may 
intensify  the  already  existing  desire  to  lay  up  treasure  upon  earth.  The 
abstinence  theory,  also,  if  true  of  interest,  would  have  to  be  applied  to 
rent,  since  a  land-owner  is  in  the  same  situation  as  a  money-owner;  for, 
although  he  cannot  consume  his  property,  he  can  consume  what  he  can 
exchange  it  for.  Even  profit  would  have  to  be  explained  in  the  same 
way;  for  he  who  applies  capital,  whether  his  own  or  borrowed,  to  pro- 
ductive purposes,  abstains  from  present  enjoyment  as  much  as  does  the 
lender. 


320  TOWARD   A    SOLUTION 

because  of  any  service  done  by  them  for  progress:  they 
simply  get  it  because  the  couditons  are  more  favorable  to 
them  when  there  is  progress,  than  are  the  conditions 
without  progress.  But  to  make  their  profit  still  greater 
than  what  was  bargained  for,  to  give  them  increase  of 
benefit  hidden  in  the  increasing  purchasing  power  of  the 
money  with  which  they  are  repaid,  is  to  make  the  con- 
ditions unnecessarily  favorable  to  them. 

Another  phase  of  the  argument  in  behalf  of  the 
creditors,  is  to  refer  to  the  fact  that  many  widows  and 
orphans  live  on  the  interest  of  capital  left  them  —  are 
creditors, —  and  to  arouse  a  sentiment  in  favor  of  help- 
ing them  (and  with  them  all  other  creditors).  But  to 
say,  or  to  imply,  that  widows  and  orphans,  though  con- 
tinuing in  command  of  the  same  purchasing  power  over 
commodities,  though  still  able  to  live  as  well  as  before, 
yet  are  injured,  or  do  not  get  their  due,  because  the 
money  returned  them  may  have  depreciated  in  cost- 
value,  or  in  esteem-value  to  society  at  large,  that  is, 
because  other  people  have  advanced  in  wealth  and  are 
acquiring  money  more  easily,  and  consequently  are 
esteeming  it  less,  is  merely  to  put  into  the  heads  of  such 
widows  and  orphans  the  canker  of  envy  —  it  is  to  give 
them  the  idea  that  they  are  injured  because  others  are 
passing  ahead  of  them,  that  they  are  injured  because 
they  are  not  given  a  share  in  the  progress  of  others.* 
Evidently  there  is  sense  in  this  talk  about  Avidows  and 
orphans  being  injured  by  "depreciation"  of  money  only 


*It  is  also  to  forget  that  there  are  other  widows  and  orphans,  far 
more  numerous,  who  have  to  work  for  their  living,  and  who  may,  per- 
haps, be  favored  more  by  money  being  stable  in  exchange-value 
than  by  its  rising  in  exchange-value  and  remaining  stable  in  one  or 
other  of  the  labor-values.  But  this  belongs  to  a  later  part  of  the 
discussion. 


ARGUMENT  FROM  FUNCTIONS  321 

when  this  term  refers  to  a  fall  in  exchange -value  or  pur- 
chasing power.  In  the  above  -argument  there  seems  to 
be  a  confusion  of  ideas  because  of  the  same  term  being 
used  in  different  meanings.  If  money  depreciates  in 
exchange -value,  widows  and  orphans  suffer.  Therefore 
it  is  thought  that  widows  and  orphans  suffer  if  money 
depreciates  in  esteem -value  or  cost -value.  Therefore 
money  ought  to  be  stable  in  esteem-value  or  cost-value, 
and  if  commodities  are  falling  in  these  values,  because 
of  progress  in  producing  them,  money  ought  not  to  fall 
with  them,  that  is,  it  ought  not  to  remain  stable  in  ex- 
change-value. Thus,  in  order  to  protect  widows  and 
orphans  from  the  evil  effects  of  money  depreciating  in 
exchange -value,  the  conclusion  is  reached  that  money 
ought  to  appreciate  in  exchange-value.  Moreover,  even 
if  it  were  admitted  that  widows  and  orphans  ought  to 
share  in  the  progress  that  may  take  place  in  the  short 
period  of  their  widowhood  or  orphanage,  without  their 
doing  anything  to  help  themselves,  or  apart  from  any 
such  efforts,  and  in  proportion  to  their  possessions,  that 
is,  as  above  said,  that  they  ought  to  be  given  such  a 
share,  there  is  no  reason  apparent  why  this  gift  should 
be  forced  from  their  debtors  instead  of  from  anybody 
else,  or  from  the  whole  people,  or  why  it  should  be  made 
to  them  in  exact  proportion  to  their  ability  to  dispense 
with  it.  If,  then,  this  claim  be  allowed,  it  would  lead 
rather  to  the  socialistic  doctrine  that  widows  and 
orphans  ought  to  be  pensioned  by  the  State,  which,  too, 
would  mean  confiscation  of  the  property  of  those  who 
have  any  to  begin  with. 

§5.  Nor  is  the  position  of  the  commodity  standard 
altered  by  asserting  that  labor  is  one  of  the  things  we 
buy  and  sell.     It  is  truejhat  we  pay  for  sonae  ser vices, _ 

u 


322  TOWARD   A    SOLUTION 

as  we  pay  for  commodities,  for  purposes  of  consump- 
tion. And  it  has  been  said  that  the  prices  of  such 
services  should  be  included  in  the  list  of  prices  by  which 
the  exchange -value  of  money  is  measured,  whenever  it 
is  practicable  to  do  so.  But  the  wages  of  laborers,  the 
salaries  of  clerks,  the  profits  of  self -paid  undertakers  of 
industry  —  in  short,  earnings,  and  especially  incomes  in 
general  —  are  not  objects  that  can  be  stored  or  loaned, 
or  as  substitute  for  which  money  is  stored  or  loaned. 
To  say,  therefore,  that  the  repayment  of  a  debt  should 
put  the  creditor  in  command  over  the  same  amount  of 
labor  as  he  had  command  over  when  he  loaned  the 
money,  seems  to  be  talking  to  no  purpose. 

But  even  if  this  pretension  of  the  labor  standard  be 
accepted  as  having  force,  it  would  seem  as  if  it  must 
admit  of  a  modification  —  not  an  alteration,  but  a  defi- 
nition —  that  takes  away  all  difference  between  the  labor 
standard  and  the  commodity  standard.  This  is  the 
objection  to  the  labor  standard,  as  ordinarily  used, 
which  has  been  advanced  by  Professor  Nicholson  and 
Professor  Ross,  and  which  has  hardly  been  noticed  by 
the  advocates  of  that  standard,  perhaps  because  it  is 
unanswerable.  In  any  class  of  commodities,  say  cotton 
cloth,  or  steel,  or  wheat,  there  are  many  qualities  of 
goodness.  And  now  in  the  commodity  standard  it  has 
always  been  recognized  that  commodities  compared  at 
the  different  periods  must  always  be,  not  merely  of  the 
same  class,  but,  as  far  as  practicable,  of  the  same  quality 
in  their  class.  Similarh%  there  are  many  classes  of 
labor,  accordiog  to  the  classes  of  the  objects  produced, 
or  the  stages  of  production  and  transportation  and 
marketing  to  which  the  labor  is  applied.  And  in  each 
class  there  are  many  qualities  of  labor.     The  qualities 


ARGUMENT  FROM    FUNCTIONS  323 

of  labor  consist  in  its  various  eflQciency.  Now  new  in- 
yeutious,  or  wiiat  in  general  are  called  improvements  in 
production,  augment  the  efBciency  of  labor,  and  so  im- 
prove its  quality.  If  a  new  invention  improves  the 
quality  of  cloth,  the  improvement  in  quality  is  to  be 
allowed  for  in  the  commodity  standard.  Therefore,  also, 
if  a  new  invention  improves  the  quality  of  labor,  by  in- 
creasing its  efficiency,  this  improvement  of  quality 
would  seem  to  require  to  be  allowed  for  in  the  labor 
standard.  But  if  such  improvement  in  the  quality  of 
labor  be  allowed  for  in  the  labor  standard,  as  the  quality 
of  the  labor  is  judged  by  the  quality  and  quantity  of  the 
product,  the  labor  standard  is  judged  by  the  commodity 
standard,  and  virtually  reduces  to  the  commodity  stand- 
ard. It  is  only  by  not  allowing  for  the  improvement  of 
labor  that  the  labor  standard  is  distinguished  from  the 
commodity  standard.  This  non -allowance  is  an  imper- 
fection in  the  labor  standard,  as  distinguished  from  the 
commodity  standard,  which  seems  to  deprive  it  of 
justification. 

That  this  is  so,  may  be  illustrated  by  a  couple  of 
suppositional  cases.  The  measurement  of  value  in  dif- 
ferent places  is  in  many  respects  like  the  measurement 
of  value  at  different  times,  and  the  transference  of  a 
debt  from  one  country  to  another  has  much  analogy 
with  the  separation  of  the  date  of  settling  from  the  date 
of  contracting.  Suppose  that  A  and  B  are  persons 
residing  in  India,  and  A  lends  to  B  a  sura  of  money 
worth  one  hundred  hours  of  Hindo  labor,  and  both  these 
parties  come  to  England:  is  B  to  repay  to  A  a  sura  of 
money  worth  one  hundred  hours  of  English  labor?  If 
not,  then  why,  if  A  and  B  lived  in  England  in  the  year 
900  and  A  lent  B  a  sum  of  money  worth  one  hundred 


324  TOWARD    A    SOLUTION 

hours  of  crude  Anglo-Saxon  labor,  and  if  the  heir  of  B 
still  owes  this  debt  to  the  heir  of  A  in  the  year  1900, 
should  the  heir  of  B  now  be  expected  to  repay  the  heir 
of  A  a  sum  of  money  worth  one  hundred  hours  of 
mcdern  machine-aided  English  labor"?  Or  if  instead  of 
hours  we  used  days,  permitting  of  decrease  of  hours 
of  labor,  though  there  is  approach  toward  justice,  the 
answer  still  does  not  seem  to  be  affirmative.  Naturally 
the  principle  of  repayment  is  the  same  in  a  debt  of  a 
thousand  years  as  in  a  debt  of  ten  years, — and  some  out- 
standing debts  are  already  over  two  hundred  years  old. 
And  if  any  one  thinks  the  principle  of  repayment  sug- 
gested in  the  last  supposition  is  just,  he  should  think 
that  the  same  principle  ought  to  apply  to  the  repayment 
of  the  debt  to  which  the  parties,  instead  of  being 
removed  from  Alfredian  England  to  Victorian  England, 
are  removed  from  British  India  to  Great  Britain.  The 
efficiency  of  the  labor  repaid  may  not  be  much  more 
increased  in  the  former  case  than  in  the  latter — and 
gnmter  or  less  of  degree  does  not  affect  the  principle. 
Yet  advocates  of  the  uncorrected  labor  standard  might 
hesitate  to  apply  their  principle  to  the  former  case.* 
The  reader  may  judge  whether  repayment  in  the  product 
of  equal  amount  of  labor  after  an  interval  of  improve- 
ment, is  identical  with  "the  exchange  of  work  so  com- 
mon among  our  farmers  in  harvest  and  threshing  time," 
which  is  used  as  a  model  by  the  Director  of  the  Mint.t 

*  In  that  example  the  difficulty  for  the  labor-standard  advocate  would 
be  still  greater  if  we  suppose  only  one  of  the  parties  to  remove  from 
India  to  Enjrland.  Probably  it  would  be  allowed  that  neither  removal 
can  affect  the  terms  of  the  contract,  which  call  for  Hindoo  labor.  Then 
both  removals  would  not.  Then  why  should  a  removal  in  time  affect 
the  terms  of  the  contract,  which  call  for  labor  of  the  time  of  making  the 
contract  ? 

tin  the  same  Report  (1898)  our  government  official  advances  per- 


ARGUMENT  FROM  FUNCTIONS  325 

The  idea  here  being  isolated  will  bear  the  emphasis 
of  repetition.  We  have  seen  President  Hadley  state 
that  what  the  producing  debtor  borrows  is  "a  certain 
amount  of  control  over  labor,"  whence  he  would  deduce 
that  repayment  should  be  made  according  to  the  labor 
standard  instead  of  the  commodity  standard.  The 
premiss  may  be  conceded,  without  admitting  the  con- 
clusion. The  repayment  should  be  in  the  same  amount 
of  the  same  labor,  yes;  but  not  in  the  same  amount  of 
improved  labor.  A  more  profound  examination  of  what 
passes  from  the  creditor  to  the  debtor,  and  what  should 
therefore  be  returned,  shows  that  it  is  not  merely  con- 
trol over  labor.  Fundamentally,  as  said  by  Berkeley, 
it  is  power.  But  what  power?  In  the  widest  signifi- 
cance, it  is  power  of  purchasing.  If  the  borrower,  like 
the  lender,  be  merely  a  consumer,  both  parties  are 
interested  in  the  power  of  purchasing  commodities;  and 
we  have  at  once  the  commodity  standard.  But  in  an 
industrial  system  the  borrower  of  money,  who  does  not 
want  to  consume  for  himself  what  he  can  purchase  with 
it,  but  wants  to  make  more  with  its  help,  is  not  con- 
cerned with  the  things  themselves  he  can  purchase  with 
it  so  much  as  with  the  aid  they  render  him.     What  he 


haps  the  only  reply  ever  made  to  the  above  argument.  It  is  this:  "The 
apparent  advantage  to  the  lender  in  receiving,  by  the  lapse  of  time,  a 
more  efficient  labor  than  he  gave,  would  be  promptly  offset  by  the  falling 
interest  rate,  and  at  most  is  a  small  factor  when  the  average  length  of 
loans  is  considered,"  p.  574.  The  counter-reply  is  that  the  offsetting  by 
the  falling  rate  of  interest  is  not  complete,  as  is  virtually  admitted  in 
the  last  clause,  which  also  is  an  admission  that  the  principle  is  wrong, 
alleging  only  that  the  wrongness  cannot  do  much  harm  —  an  allegation 
which  itself  is  based  on  error,  since  long  loans,  frequently  obtained  by 
renewals  of  short  ones,  with  or  without  reduction  of  interest,  are  not 
uncommon,  and  since  it  forgets  another  allegation  made  by  the  author 
himself,  that  of  late  progress  has  been  rapid. 


326  TOWARD   A    SOLUTION 

is  interested  in,   and  what  he  is  really  borrowing,   is 
power  of  producing, —  and  this,  too,  is  what  the  lender 
is  really  lending,  since  he  is  the  passive  party  and  merely 
delivers  what  the  borrower  wants  and  pays  for.     Here, 
then,  we   have   reached   the   fundamental   thing   in  an 
industrial  loan,  or  contract  in  general.     Now,  productive 
power  is  yielded  in  three  ways,  and  its  measurement  is 
the  same  in  each.     It  is  yielded  by  land,  in  its  fertility; 
by  tools  and  machiner}-,  in  their  adaptedness  to  ends; 
and  bx  labor,  in  its  skill  or  efficiency.     Thus  the  bor- 
rower is  not  interested  in  the  mere  quantity  of  land  he 
can  purchase,  but  also  in  its  fertility  —  and  he  will  as 
lief   have  half  as  much  if   doubly  fertile    (with  equal 
application  of  costs).     Nor  is  he  interested  in  the  mere 
weight  or  size  of  the  tools  or  machines  he  can  purchase; 
but  he  will  prefer  to  have  small  ones  that  are  more  aid- 
ful,  than  big  ones  that  are  less  aidful.     And  similarly 
he  is  interested  not  in  the  mere  number  of  hours  (or 
days)  of  labor  he  can  hire,  but  also  in  the  strength  and 
skill  of  the  laborers — he  will  prefer  to  have  fewer  strong 
laborers  than  more  weak  ones,  where  strength  is  wanted, 
and  fewer  skilful  ones  rather  than  more  unskilful  ones, 
where  skill  is  needed  in  managing  tools  or  machinery. 
Therefore  it  is  perfectly  proper  that  he  restore  to  the 
lender  money  that  will  purchase  less  land,  if  the  land  be 
proportionally    more    fertile;     less    machinerj',    if    the 
machinery   be   proportionally    more    aidful;     and    less 
labor,   if    the   labor   be   proportionally   more   efficient. 
To  say  that  he  ought  to  repay  money  that  will  purchase 
the  same  quantity  of  labor,  measured  by  time,  withoiii 
regard  to  its  efficiency,  is  like  saying  that  he  ought  to 
repay  money   that  will   purchase  the  same  quantity  of 
land,  measured  by  the  acre,  without  regard  to  its  fer- 


ARGUMENT  FROM  FUNCTIONS  327 

tilit5%  or  the  same  quantity  of  machinery,  measured  by 
weight  or  size,  without  regard  to  its  adaptedness. 
Evidently  there  is  only  one  measure  of  productive 
power,  and  that  is  the  product.  Hence  the  commodity 
standard  is  the  standard  by  which  the  labor  standard 
itself  ought  to  be  measured. 

§6.  The  preceding  has  been  directed  at  the  claim 
that  the  creditor  should  be  repaid  in  command  over 
equal  quantity  of  improved  labor,  consequently  in  com- 
mand over  the  whole  increment  of  the  increased  product, 
without  sharing  it  Avith  the  debtor;  for  this  we  have 
seen  to  be  the  true  intent  of  the^  labor  standard, 
although  its  advocates  generally  urge  it  on  the  ground 
that  the  creditor  ought  to  share  the  increment  with  the 
debtor.  This  last  position,  however,  is  really  the  posi- 
tion of  the  compromisers  between  the  labor  standard 
and  the  commodity  standard.  This  intermediate  posi- 
tion is  likewise  disproved  by  what  precedes,  which 
disproves  the  uncorrected  labor  standard  in  toto,  and 
therefore  also  in  parte.  The  mixture  of  the  two  stand- 
ards is  only  a  half  correction  of  the  labor  standard,  and 
therefore,  though  better  than  the  out-and-out  labor 
standard,  is  not  so  good  as  the  commodity  standard. 
Still,  this  mixture  forms  a  new  standard,  a  position  by 
itself,  which  calls  for  animadversion  as  to  why  it  has 
been  advocated,  and  for  renewal  of  the  disproof  of  the 
false  element  in  it. 

The  most  elementary  reason  for  holding  the  halfway 
position  is  the  idea  that  exchange-value  is  purchasing 
power  over  both  commodities  and  labor,  wherefore  the 
command  over  labor,  represented  by  wages,  should  be 
included  in  the  lists  by  which  the  exchange -value  of 
money  is  measured.     This  is  to  be  denied  simply  by 


328  TOWARD   A    SOLUTION 

denying  that  we  ever  purchase  labor.  Labor  never 
passes  from  the  possession  of  the  employee  to  the  posses- 
sion of  the  employer  —  it  is  not  a  good  that  can  be  de- 
livered. Only  the  products  of  labor  are  delivered,  or 
rendered;  only  the  products  of  labor,  material  or  imma- 
terial, are  paid  for  or  purchased.  Hence  exchange -vahie 
has  nothing  to  do  with  active  labor,  though  it  has  to  do 
with  passive  services  —  not  with  labor  doing,  but  only 
with  work  done, —  which  latter  are  to  be  included  in,  as 
forming  part  of,  the  commodity  standard,  so  far  as  prac- 
ticable. The  wages  of  labor,  or  the  reward  of  labor  in 
earnings,  are  another  matter  altogether. 

Almost  equally  elementary  is  the  idea  that  when  the 
two  standards  part  company  we  cannot  choose  between 
them,  and  so  must  allow  equal  force  to  each  and  stand, 
like  Buridan's  ass,  undecided  in  their  midst.  This  looks 
like  mere  acknowledgment  of  incompetence  to  solve  the 
problem.  And  when  the  problem  is  solved  by  showing 
that  the  apparently  opposing  factors  are  not  really  so, 
since  the  one  of  them,  on  analysis,  reduces  to  the 
other,  it  turns  out  to  be  a  partial  submission  to  false 
appearance. 

More  recondite  reason  has  also  been  invoked,  not 
merely  admitting  equality  in  opposing  factors,  but  as- 
serting it,  and  so  positively  requiring  a  compromise. 
The  idea  is  entertained  that  constancy  of  exchange- 
value,  measured  by  the  commodity  standard,  is  accord- 
ing to  a  "consumption  standard,"  and  as  the  creditor  is 
a  consumer,  it  may  be  proper  for  him  to  be  paid  in 
money  so  constant;  but  that  the  debtor  is  a  producer, 
and  so  the  standard  for  him  to  pay  in  is  a  "production 
standard,"  identified  with  a  labor  standard  of  some  sort. 
Therefore  in  a  state  of  progress,  when  the  latter  stand- 


ARGUMENT  FROM  FUNCTIONS  329 

ard  advances  beyond  the  former,  there  is  a  hitch, 
because  the  creditor  ought  to  receive  according  to  the 
one  standard  and  the  debtor  ought  to  pay  according  to 
the  other.  And  the  only  way  out  of  this  difficulty  is  by 
a^  compromise  between  the  two  standards.  Thus  we 
have  seen  Dr.  Adams  maintain  that  "the  consumption 
standard  is  wholly  one-sided, —  fairly  equitable  from  the 
standpoint  of  the  consumer  or  creditor,  but  completely 
unsuited  to  voice  or  express  the  relative  ability  of  the 
debtor  or  producer  to  repay."*  And  we  have  noticed 
the  remarkableness  of  this  position,  since  it  virtually 
asserts  that  in  a  period  of  progress  the  creditors  have  a 
right  to  repayment  only  in  the  same  exchange -value, 
while  the  debtors  have  the  duty  of  repaying  them  in  the 
same  labor-value  (which  is  increased  exchange-value). t 
If  the  first  part  of  this  position  be  correct,  the  whole 
matter  is  disposed  of:  for  debtors  cannot  possibly  have 
a  duty  to  pay  back  more  than  the  creditors  have  a  right 
to  demand.  The  statement  is,  however,  in  defiance  of 
the  whole  claim  of  the  labor-standard  advocates,  which 
i^that  creditors  have  a  right  to  repayment  in  the  same 
labor-value,  as  also  that  the  debtors  have  the  duty  to 
repay  in  this  same  value,  and  no  right  to  get  off  by  re- 
paying a  smaller  value  (the  same  exchange- value),  so 
that  there  is  no  hitch  whatever,  and  no  need  of  a  com- 
promise. The  compromise  can  be  required  onl3^  on  the 
ground  that,  while  the  creditors  have  the  right  claimed, 
the  debtors  have  a  right,  which  limits  their  duty,  to 


*0p.  cit.  pp.  11-12. 

tAdams,  indeed,  views  it  as  to  the  interest  of  the  debtors  to  repay 
according:  to  the  "production  standard,"  even  in  a  period  of  progress. 
We  cannot  stop  at  such  a  slip;  and  if  anything  remains  to  the  argument, 
it  must  be  as  stated  in  the  text. 


330  TOWARD   A   SOLUTION 

repay  in  the  same  exchange-value.  But  there  cannot 
possibly  be  any  such  conflict  of  rights,  or  of  a  right  and 
a  duty;  and  the  appearance  of  it  can  be  brought  about 
only  by  a  mistake  somewhere  in  the  premisses.  That  the 
creditors  have  no  just  claim,  and  so  no  right,  to  repay- 
ment in  anything  more  than  the  same  exchange-value, 
we  have  already  proved.  Therefore  there  is  perfect 
harmony  between  the  rights  of  the  two  parties,  or 
between  the  right  of  the  one  and  the  duty  of  the  other.* 
But,  for  the  sake  of  completing  the  argument,  let  us 
examine  this  strange  claim,  never  urged  except  by 
innuendo,  that  in  a  period  of  progress  the  duty  of  the 
debtor  exceeds  the  right  of  the  creditor,  and  that  it  can 
be  fulfilled  only  by  the  debtor  returning  the  same  labor- 
value,  or  paying  according  to  his  "relative  ability"  to 
produce.  Here  the  claim  is  direct,  that  the  debtor 
ought  to  return,  not  the  same  absolute  productive 
power,  but  an  increased  productive  power  which  bears 
the  same  relation  to  the  productive  power  borrowed  as 
the  productive  power  in  the  world  at  large  (for  equal 
number  of  workers,  or  for  equal  population)  at  the  time 
of  repayment  bears  to  the  productive  power  in  the  world 
at  large  at  the  time  of  contracting  the  debt.  No  reason 
is  assigned  for  this  claim,  and  there  seems  to  be  in  it 
not  a  particle  of  justice.  It  can  be  justified  only  on  the 
assumption  that  the  increased  productive  power  is  of  the 
same  value  of  some  sort  —  sjiy,  the  same  esteem-value. 
But  this  would  show  that  the  creditor  has  a  right  to 
receive  this  same  value,  as  well  as  the  debtor  has  a  duty 
to  pay  it,  and  so  is  belied  by  the  admission  that  the 


*  Which  htirmony  remains  also  in  a  period  of  retrogression.  Then 
the  creditors  have  a  right  to  repayment  in  the  same  exchange-value,  and 
the  debtors  have  the  duty  to  repay  in  the  same  exchange-value. 


ABGVMENT  FROM   FUNCTIONS  331 

creditor  can  demand  only  the  same  exchange -value. 
The  argument  merely  reverts  to  the  previous  discussion 
about  the  two  kinds  of  sameness  of  value,  hampered  by 
an  admission  on  the  wrong  side.  What  is  new  in  the 
present  position  is  a  vague  idea  that  as  the  ability  of  the 
debtors  increases  —  that  is,  as  their  ability  to  repay  their 
debts  increases, —  they  ought  to  increase  the  amount  of 
their  repayment.  A  corollary  to  this  would  be  that  the 
creditors  would  have  a  right  to  repayment  in  the  same 
"relative  ability,"  or  capacity,  to  consume;  which  is 
known  to  develop  with  exercise.  This  would  mean  that 
the  richer  the  creditors  become  —  by  working  for  them- 
selves, or  by  inheritance,  or  b}^  saving,  or  by  corrupt 
political  machinations  (the  means  are  not  in  question), — 
the  greater  grows  their  claim  of  right  to  increased  repaj''- 
meut.  This  is  absurd;  but  it  is  no  more  absurd  than 
the  argument  from  the  increased  ability  of  the  debtors 
to  produce.  Moreover,  this  increased  ability  of  the 
debtors  to  produce  does  not  necessarily  rest  upon  their 
debts,  nor  does  it  necessarily  involve  increased  ability 
to  pay  those  debts,  so  far  as  the  debts  themselves  are 
concerned.  In  other  words,  although  some  debts  are 
loaned  to  inventors,  yet  in  many  if  not  in  most  cases, 
the  increased  ability  is  a  resultant  of  other  factors  than 
the  debt  itself.  When  the  industrial  debtor  borrowed, 
he  presumably  invested  the  money  in  machinery  such  as 
existed  at  the  tirne.  Since  then  there  have  been  new 
inventions.  But^  the  debtor  remains  in  possession  of 
the  older  machinery.  Thus  the  ability  to  produce  which 
the  debtor  borrowed  is  represented  by  the  inferior 
machinery  which  he  could  procure  at  the  time  of  his 
borrowing.  There  is  no  reason  apparent,  therefore, 
why   he  should   repay   money   that   will   purchase   the 


332  TOWARD   A   SOLUTION 

greater  quantity  of  commodities  produced  with  the 
better  machinery  which  he  did  not  procure  with  the 
money  he  borrowed,  but  which  has  since  come  into  use 
and  into  competition  with  him.  He  may,  indeed,  him- 
self have  since  procured  the  better  machinery,  with  other 
capital,  perhaps  obtained  in  another  loan.  But  that 
is  another  matter,  representing  another  debt.  The 
increased  ability  to  pay  that  other  debt  is  probably  dis- 
counted in  that  other  debt;  at  all  events,  it  is  concerned 
onh-  with  that  other  debt,  and  if  he  gets  increased 
profits  from  it  there  is  no  reason  why  this  increase 
should  be  drawn  upon  by  the  creditor  of  the  old  debt 
(especially  if,  as  is  possible,  the  new  creditor  has  been 
willing  to  take  less  interest).  This  is  so  even  on  the 
supposition  that  the  ability  to  pay  the  old  debt,  as 
derived  from  that  debt  itself,  is  unimpaired  (except  by 
the  ordinary  deterioration,  which  of  course  is  provided 
against  from  the  beginning).  Much  more,  then,  should 
it  be  so  if  the  ability  to  pay  the  old  debt  is  actually 
impaired  by  the  greater  productive  power  that  has  since 
been  brought  into  competition  with  its  investment. 

§7.  Another  argument  for  the  intermediate  position, 
as  usually  conceived,  involves  a  total  retraction  of  one  of 
the  positions  provisionally  allowed  in  the  preceding 
pages.  We  have  seen  the  doctrine  maintained  that 
money -incomes  ought  to  remain  stable,  however  much 
real  incomes  (commoditj'- incomes)  may  grow.  This 
position  is  assumed  on  the  ground  that  money  would 
then  be  stable  in  "value" — which,  we  have  seen,  can 
only  mean  esteem-value.  Now,  of  esteem-value  this 
may  be  a  wrong  conception.  It  is  based  on  the  idea 
that  a  person's  total  possessions,  or  his  total  earn- 
ings, are  always  of    the   same   esteem  -  value   to   him. 


ARGUMENT  FROM  FUNCTIONS  333 

But  about  this  there  seems  to  be  something  wrong. 
It  is  perfectly  evident  that  as  a  person's  posses- 
sions increase,  their  total  esteem  -  value  to  him  does 
not  increase  in  the  same  proportion.  But  it  would 
seem  that  it  does  increase  in  some  smaller  degree. 
Thus  it  is  not  uncommon,  during  wars,  specially  to 
commend  rich  men  for  showing  a  self-sacrificing  spirit; 
which  can  only  be  because  of  a  generally  accepted 
opinion  that  life  has  greater  attraction  for  the  rich  than 
for  the  poor.  It  is  true  that  the  proportion  between  the 
rate  of  increase  of  such  total  esteem -value  and  the  rate 
of  increase  of  the  total  possessions  is  not  determinable 
in  the  present  state  of  economic  science,  and  is  one  of 
the  problems  that  still  confront  the  scientific  economist. 
In  the  absence,  then,  of  such  definite  knowledge,  the 
proportion  may  be  taken  to  be  half.  Then  there  ought 
to  be  an  increase  of  money -incomes  half  as  fast  as  the 
increase  in  real  incomes.  This  would  require  a  fall  of 
prices  (since  prices  could  remain  stable  only  if  the 
money -incomes  increased  as  fast  as  the  real  incomes), 
but  a  fall  not  so  great  as  it  would  be  if  money -incomes 
remained  stable.  We  should  thus  have  the  desire  for 
rising  incomes  and  falling  prices,  which  is  the  distinc- 
tive mark  of  the  intermediate  position.  The  present 
position,  however,  would  no  longer  be  a  compromise 
between  the  two  extremes  positions,  but,  like  Professor 
Clark's,  it  would  be  one  of  the  extreme  positions  itself, 
beyond  which  the  old  extreme  (of  fixed  money-incomes) 
would  be  left  over  as  an  excess  without  justification.  It 
would  no  longer  pretend  that  money  should  both  rise  in 
exchange -value  and  fall  in  esteem -value:  it  would 
assert  that,  while  rising  in  exchange -value,  money 
should    be   stable    in   esteem -value   rightly   measured. 


334  TOWARD   A    SOLUTION 

And  between  it  and  the  other  extreme  (of  stable  prices) 
the  new  intermediary  position  would  be  merely  that 
prices  should  fall  less  and  money -incomes  rise  more, 
about  half  and  half,  than  is  required  by  this  new 
principle. 

The  objection  to  this  innovation,  for  our  purposes, 
is  that  it  merely  introduces  a  new  and  perhaps  better 
measurement  of  the  esteem-value  of  money,  but  does 
not  add  a  single  reason  to  show  why  debts  ought  to  be 
paid  in  the  same  esteem -value,  so  measured,  rather  than 
in  the  same  exchange -value.  Every  reason  previously 
urged  in  favor  of  repayment  in  the  same  exchange -value 
and  against  repayment  in  the  same  esteem -value,  still 
holds  good,  although  the  wrong  contended  against  is 
diminished  by  the  diminished  departure  from  the  com- 
modity standard.  For  instance,  the  new  position  still 
commits  the  injustice,  though  in  smaller  degree,  of  re- 
quiring that  the  creditor,  qua  creditor,  should  have  the 
esteem -value  of  particular  things  reduced,  though  to 
smaller  extent,  to  him,  without  exertion  on  his  part, 
whenever  it  is  reduced  to  his  debtors  through  their 
exertions. 

§  8.  We  may  conclude  this  part  of  the  discussion 
with  another  argument  that  applies  against  the  doctrine 
of  repaying  debts  in  the  same  esteem -value,  no  matter 
what  be  the  way  in  which  esteem -value  is  to  be  measured. 
The  increase  of  ability  to  produce  and  the  increase  of 
wealth,  with  the  consequent  fall  in  the  esteem-value  of 
given  quantities  of  goods,  are  not  confined  to  the  race. 
It  is  the  normal  condition  of  the  individual  to  grow  in 
skill  and  in  wealth,  so  that  things  normally  fall  in 
esteem -value  to  the  individual,  as  he  grows  older. 
Now,  if  a  young  man  borrows  a  hundred  dollars  when 


ARGUMENT   FROM   FUNCTIONS  335 

his  day's  labor  may  be  worth  only  one  dollar  and  the 

few  commodities  he  commands  possess  a  high  esteem- 
value  to  him,  if  he  later,  before  repaying  the  loan,  de- 
velops in  power  and  becomes  rich  and  his  day's  labor  is 
worth  fifty  or  a  hundred  dollars,  and  the  things  which 
before  had  a  high  esteem -value  to  him  now  have  a  low 
esteem -value,  and  he  parts  with  a  fifty -dollar  bill  with 
as  little  concern  as  he  used  to  feel  at  spending  a  dollar, 
it  is  certain  that  no  advocate  of  money  being  stable  in 
esteem -value,  which  means  stable  in  esteem -value  to  the 
race  at  large,  expects  that  this  man  should  repay  his 
debt  with  a  sum  having  the  same  esteem -value  to  him 
as  when  he  borrowed  —  not  even  if  his  creditor  had  de- 
veloped in  the  same  manner  so  that  the  repayment  would 
have  the  same  esteem -value  to  him  as  when  he  lent, — 
which  might  require  repayment  in  five  thousand  dollars. 
It  is  true  that  economic  principles  cannot  be  applicable, 
to  every  individual  case.  Economic  principles  are  only 
of  general  application,  and  apply  to  the  average  man. 
But,  although  this  example  may  be  extravagant,  that  is, 
much  above  the  average,  yet  it  is  a  general  fact  that 
esteem -values  fall  more  rapidly  to  the  individual  than  to 
the  race.  Now,  the  average  fall  of  esteem -values  to  all 
individuals  within  the  race,  as  they  grow  from  youth  to 
age,  admits  of  measurement,  whether  ever  performed  or 
not.  So  also  does  the  average  fall  for  the  whole  race. 
In  this  last  we  must  compare  the  status  of  the  average 
man  at  a  particular  stage  of  his  development  with  the 
status  of  the  average  man  in  anotlier  generation  at  the 
same  stage  of  his  development.  Here  the  advance  may 
be  slow,  while,  as  regards  debts  between  individuals^ 
continuing  over  ten  or  twenty  years  or  so,  the  advance 
is  normally,  or  on  the  average,  comparatively  rapid.     It 


336  TOWARD   A    SOLUTION 

might  seem,  then,  that  only  public  debts,  or  quasi- 
public  debts,  lasting  over  many  generations,  should  be 
repaid  in  sums  having  the  same  esteem -value  to  the 
race,  and  that  private  debts  should  be  repaid  in  sums 
having  the  same  esteem -value  to  the  average  individual, 
according  to  the  average  rate  of  advance  of  the  indi- 
vidual. Yet  this  last  operation  is  so  absurd  that  no 
advocate  of  the  labor  standard  would  admit  it.  Then 
why  is  not  the  demand  for  repaying  long  debts  in  sums 
having  the  same  esteem -value  to  the  race,  though  not  so 
extreme,  equally  false  in  principle  ? 

In  the  position  that  debts  should  be  repaid  in  the 
same  exchange-value,  there  is  the  same  distinction  be- 
tween the  individual  and  the  race.  The  purchasing 
power  of  money  varies  differently  to  different  indi- 
viduals, and  it  is  impossible  for  money  to  remain  stable 
in  exchange -value  for  all  individuals.  Money  can  be 
desired  to  remain  stable  in  exchange -value  only  for  all 
people,  for  the  race, —  that  is,  also,  for  the  average  indi- 
vidual. But  now  with  money  remaining  stable  in  ex- 
change-value for  the  race  or  for  the  average  individual, 
the  principle  is  the  same  for  the  repayment  of  short 
debts  as  for  the  repayment  of  long  debts.  There  is  no 
inconsistency  involved  in  the  commodity  standard,  as 
there  is  in  the  labor  staudai'd. 


ARGUMENT  FROM  RESULTS  337 


CHAPTER    IV 

ARGUMENT   FROM   THE   RESULTS   OP   MONEY   BEING 
STABLE   IN   THE   DIFFERENT   KINDS   OF   VALUE 

§1.  The  argument  from  results  concerns  itself  with 
the  good  and  the  evil  which  attend  stabilitj^  of  money 
in  exchange -value  or  in  cost-value  or  esteem-value. 
The  good  and  the  evil  resulting  from  the  different 
fuuctionings  of  money  may  manifest  themselves  in  the 
distribution  of  wealth  between  the  different  classes  of 
society,  and  in  the  production  of  wealth  by  and  for  the 
whole  of  society.  In  the  former  aspect  of  the  subject 
the  consideration  of  justice  again  intrudes.  In  the 
latter  the  good  or  the  evil  consists  not  merely  in  increase 
or  in  decrease  of  production,  but,  progress  and  retro- 
gression being  also  determined  by  other  causes,  in 
greater  or  in  less  increase,  or  in  less  or  in  greater 
decrease.  The  latter  results  are  mostly  a  consequence 
of  the  former,  since  the  good  or  the  bad  distribution  of 
the  products  of  labor  between  the  different  classes  of 
producers,  and  between  the  producers  and  the  non- pro- 
ducers, has  much  effect  upon  the  prosecution  of  produc- 
tion. Hence  the  subject  of  distribution  calls  for 
attention  first.  In  this  subject  it  is  of  importance  to 
distinguish  from  the  static  the  dynamic  treatment  of  the 
question,  and  to  pay  more  attention  to  the  latter,  the 
former  being  elementary  and  more  hj-pothetical  than 
real. 

The  advocates  of  money  stable  in  either  of  the  labor-_ 
values  and,  with  progress,  rising  in  exchange -value, 
have  assumed  two  distinct  and  opposite  positions.     The 


338  TOWARD   A    SOLUTION 

J  one  is  virtually  this:  that  with  progress,  money  being 
stable  in  a  labor- value,  but  rising  in  exchange -value, 
prices  falling,  (1)  the  borrowing  undertaker  of  industry 
is  at  all  times  as  capable  of  paying  his  creditors  the 
same  money -interest  and  of  repaying  the  money-capital, 
according  to  agreement,  and  so  of  assigning  to  them 
increase  in  commodity -wealth  proportionate  to  their 
contribution  to  the  progress,  as  he  would  be  if  no  prog- 
ress had  occurred  and  money  had  remained  stable  in 
exchange -value;  (2)  he  is  as  capable  of  continuing  to 
pay  his  employees  the  same  money -wages  all  along,  and 
so  of  assigning  to  them  increase  in  commodity -wealth 
proportionate  to  the  increasing  service  rendered  by  them, 
as  he  would  be  if  no  progress  had  occurred  and  money 
had  remained  stable  in  exchange -value;  and  (3)  Ins 
own  money -profits  remain  as  large,  so  that  he  retains 
for  himself  his  share  in  the  increase  of  commodity- 
wealth  proportionate  to  his  own  contribution  to  the 
progress,  as  would  be  his  money -profits  if  no  progress 
had  occurred  and  money  had  remained  stable  in  ex- 
change-value. Here  we  have  a  very  pretty  presentation 
of  things.  It  of  course  is  not  pretended  that  every  case 
works  out  as  smoothly  as  here  stated;  but  it  is  alleged 
that  this  is  the  average  working  of  industrial  conditions. 
In  such  average  working  everything  is  automatic.  The 
creditors  get  their  due;  the  employees  get  their  due;  the 
undertakers  of  industrj',  who  are  debtors  in  relation  to 
the  former  and  employei's  in  relation  to  the  latter,  like- 
wise get  their  due, —  all  by  means  of  every  monetary 
transaction  remaining  exactly  the  same  as  if  there  were 
no  progress,* 


*  Another  element  in  distribution  is  rent.     Rent  differs  from  interest 
only  by  being  pay  for  special  capital  loaned,  while  interest  is  pay  for 


ARGUMENT  FROM   RESULTS  339 

This  merely  static  position  fails  immediately  in  its 
first  involved  pretension.  It  says  the  creditors  get  their 
due, —  that  they  get  increase  in  real  wealth  in  just  pro- 
portion to  their  contribution  to  the  progress.  But  we 
have  seen  thaj  while  loaned  capital  contributes  to  pro- 
duction, for  which  the  lenders  get  pay  in  interest,  it 
does  not  contribute  to  progress,  which  is  accidental  so 
far  as  it  is  concerned;  wherefore  the  lenders  deserve  no 
increase  if  progress  happens  to  take  place.  And  so,  if 
things  worked  in  this  way,  the  creditors  would  get  more 
than  their  deserts.  Consequently  the  other  two  classes 
must  get  less  than  their  deserts.  The  whole  pretty  scheme 
collapses.  But — and  here  is  the  second  error  —  things 
do  not  work  in  this  way,  even  on  the  average.  The 
comparison,  notice,  is  made  between  what  is  supposed  to 
take  place  with  money  stable  in  a  labor-value  in  a  state 
of  progress  and  what  takes  place  with  money  stable  in 
exchange-value  in  a  state  of  no  progress.  Now,  in  a 
progressive  period  the  rate  of  real  interest  is  found  to 
be  higher  than  in  a  corresponding  stationary  period. 
But  if  the  money-interest  continues  the  same,  money 
rising  in  command  over  commodities,  the  rate  of  real 
interest  is  not  merely  higher,  it  is  a  rising  rate.  And 
not  only  the  real  interest  rises,  but  the  real  principal 
also  rises,  the  increase  of  the  latter  being  a  further  ad- 


capital  in  the  form  of  money.  It  resembles  interest  also  in  frequently 
being  contracted  for  in  fairly  long  terms,  during  which  no  alteration  can 
be  made  (in  this  respect,  however,  also  resembling  some  salaries). 
But  in  the  very  point  in  which  it  differs  from  interest  it  resembles 
wages,  and  this  is  a  point  very  important  for  our  purposes.  It  involves 
no  repayment  of  money-principal.  On  account  of  this  double  resem- 
blance, everything  seems  to  be  satisfied  by  treating  only  of  the  simple 
elements,  interest  and  wages.  At  all  events,  little  attention  has,  in  our 
subject,  been  devoted  to  rent. 


340  TOWARD   A    SOLUTION 

dition  to  the  increase  of  the  former.  For  this  reason, 
to  counteract  this  double  increase,  the  money- interest  is 
generally  found  to  be  at  a  lower  rate  with  money  rising 
in  exchange-value  than  with  money  stable  in  exchange- 
value.  Here  is  a  disturbing  factor,  which  we  must 
presently  investigate.  It  should  be  remarked,  however, 
that  the  comparison  ought  rather  to  be  made  between 
money  stable  in  a  labor -value  in  a  state  of  progress  and 
money  stable  in  exchange -value  likewise  in  a  state  of 
progress."^  Now,  in  a  state  of  progress,  with  money  re- 
maining stable  in  exchange -value,  and  prices  on  the 
average  being  at  a  constant  level,  the  conditions  are  as 
follows:  (1)  The  borrowing  undertaker  of  industry 
pays  his  debtors  the  same  money -interest  and  the  same 
commodity-interest,  according  to  agreement,  whi^fi'  calls 
for  a  higher  rate  of  money  interest  than  if  money,  being 
stable  in  a  labor-value,  were  rising  in  exchange -value, 
thus  calling  for  a  higher  rate  of  commodity -interest 
likewise,  at, the  beginning,  but  not  so  later  on,  since  in 
the  other  case,  the  commodity -interest  rises  and  at  a 
definite  period  overtakes  and  then  surpasses  the  com- 
modity-interest in  this  case,  aided  also  in  that  case  by 
the  ever  increasing  commodity -amount  of  the  principal, 
7%nd  so,  in  this  case,  he  assigns  no  gradually  growing  in- 
crease in  real  wealth  to  his  creditors,  because  they  have 
not  contributed  to  it,  although  he  may  be  capable  of 
doing  so,  but  instead  he  does  give  them  more,  in  in- 
terest, at  the  start,  in  consequence  merely  of  the  bar- 
gaining which  then  takes  place; t  (2)  he  is  capable  of 

•In  the  other  comparison  money  was  stable  in  the  labor-values  as 
well  as  in  exchange-value,  on  the  side  where  the  supposition  was  of  no 
progress;  wherefore  there  was  no  proper  contrast  with  the  case  of  money 
stable  in  a  labor-value,  with  progress. 

tThe  reference  is  to  loans  running  for  more  than  one  Interest-paying 


ARGUMENT  FROM    RESULTS  341 

giving  his  employees  higher  and  higher  wages,  upon 
their  demand,  which  they  are  likely  to  make  when  they 
see  that  they  are  helping  him  to  larger  profits,  so  that  it 
is  likely  he  will  do  so,  this,  too,  being  a  matter  of  bar- 
gaining, the  bargaining  going  on  from  time  to  time  as 
the  progress  continues;  and  (3)  his  own  net  profits,  in 
money  and  therefore  also  in  commodities,  increase,  even 
after  he  has  made  increase  in  the  money -wages  he  pays, 
this  increase  coming  out  of  his  increasing  gross  profits 
and  giving  a  share  in  that  increase  to  his  employees, 
while  none  of  the  increase  goes  to  his  creditors,  notwith- 
standing that  the  money -interest  paid  them  is  higher 
than  it  would  be  if  there  were  no  progress.  Thus,  in 
this  case,  the  two  productive  classes  get  the  gradually 
accruing  increase  that  comes  from  improving  produc- 
tion, and  divide  it  between  themselves,  in  the  same 
manner  as  they  divide  the  product  when  there  is  no 
progress,  namely,  by  bargaining,  although,  to  repeat, 
the  creditors,  also  by  bargaining,  get  somewhat  more 
t^an  they  would  get  if  no  progress  were  being  made, 
but  the  later  creditors  get  it  at  once  as  well  as  the  earlier 
creditors,   and  no  gradual    increase  comes  to  them  as 

interval.  In  loans  with  only  one  payment  of  interest,  when  money  rises 
in  exchange-value,  part  of  the  commodity-interest  is  paid  back  within 
the  payment  of  the  principal.  This  being  taken  into  consideration,  the 
whole  commodity-interest,  as  will  be  shown  later,  is  at  once  somewhat 
higher  with  money  rising  in  exchange-value  than  with  money  stable  in 
exchange-value,  although  not  so  much  so  as  it  would  be  if  the  rate  of 
money-interest  were  the  same  in  both  cases.—  It  may  be  added  that  the 
treatment  in  the  text  is  only  of  continuous  periods  both  in  the  matter  of 
progress  and  in  the  matter  of  money  being  stable  in  the  one  value  or  in 
the  other.  What  happens  at  the  time  when  money  changes  from  being 
stable  in  one  kind  of  value  to  rising  or  falling  in  it  or  to  being  stable  in 
another  kind,  is  another  question  altogether,  which  has  to  do  with  the 
evils  arising  from  fluctuations  in  the  value  of  money,  about  which  there 
is  no  dispute. 


342  TOWARD   A    SOLUTION 

progress  continues.  Here  the  distribution  is  not  auto- 
matic, as  in  tlie  previous  position.  But,  for  this  very 
reason,  it  is  better.  The  previous  position  supposes 
that  at  the  start  everything  is  as  it  should  be,  creditors 
getting  the  right  money-interest,  and  employees  the 
right  money-wages,  leaving  the  right  money-profits  to 
undertakers;  and  it  demands  that  these  monetary  condi- 
tions should  remain  unchanged,  so  as  to  retain  un- 
changed the  same  relations  between  the  real  conditions. 
But  the  real  conditions  themselves  may  have  been  wrong 
at  the  start.  Qr^iey  may  be  right  at  one  time,  and  yet 
need  to  be  changed  at  another.  And  the  change  can  be 
brought  about  only  by  new  bargaining.  Better,  then, 
is  it  to  leave  all  these  conditions  to  the  bargaining  of 
the  day,  at  all  times.  There  is  nothing  automatic  about 
the  distribution  at  the  start.  There  should  be  nothing 
automatic  .about  the  distribution  at  any  time. 

§2.  The  other  position  is  that  the  same  general 
c5.  ,  advance  in  production  and  the  same  distribution  of  the 
increasing  wealth  between  the  various  classes  of  society 
taKe  place  whether  money  be  stable  in  exchange -value 
or  in  esteem- value  (or  cost-value).  The  general 
advance  shows  itself,  in  the  one  case,  b}^  prices  remain- 
ing constant  on  the  average  and  by  earnings  or  incomes 
rising;  and  in  the  other,  by  prices  falling  and  by  earn- 
ings or  incomes  remaining  constant.  In  either  case  the 
purchasing  power  of  the  earnings  or  incomes,  increased 
or  not  in  money-amount,  rises. —  and  in  this  rise  in 
commodity-amount  consists  the  advance  in  material 
civilization.  One  assertion  is  that  this  advance  is  the 
same  in  both  cases.  Another  is  that  there  are  various 
adjustments  of  the  rates  of  interest  and  of  Avages  that 
make   the   ultimate   distribution    between   debtors   and 


ARGUMENT  FROM  RESULTS  343 

creditors  and  between  employers  and  employees  the  same 
in  both  cases.  The  latter  is  the  more  difficult  assertion 
of  the  two,  and  upon  it  depends  the  former.  According 
to  the  present  position  it  is  indifferent  whether  money 
remains  stable  in  exchange -value  or  in  esteem -value  or 
cost-value, — and,  too,  Avhether  money  varies  in  any  or 
all  of  these  kinds  of  value,  and  how  much,  provided  the 
adjustments  are  still  possible  and  actual. 

Now,  to  a  certain  extent,  some  advocates  of  money 
stable  in  a  labor-value  have  maintained  this  last  position, 
although,  as  is  plain,  it  is  directly  contrary  to  the  one 
first  reviewed.  And,  very  curiously,  some  of  them  have 
advanced  this  new  position  mostly  of  the  relationship 
between  debtors  and  creditors,  where  we  shall  find  it  to 
be  less  justifiable,  and  have  not  held  it  of  the  rela- 
tionship between  employers  and  employees,  where  we 
shall  find  it  much  more  justifiable,  in  which  relationship, 
with  the  rest,  they  have  retained  the  previous  position. 
For  the  advocates  of  money  stable  in  a  labor-value  and, 
with  progress,  rising  in  exchange-value,  are  almost 
unanimous,  when  they  touch  upon  this  part  of  the 
question,  in  asserting  that  the  relationship  between  em- 
ployers and  employees  is  different  with  money  so  rising 
in  exchange -value  from  what  it  is  with  money  stable  in 
exchange-value, — and,  of  course,  it  is  part  of  their  con- 
tention that  it  is  better  in  the  former  case  than  in  the 
latter;  and  yet  some  of  them  try  to  make  out  that 
the  creditors  are  not  favored  in  the  one  case  more 
than  in  the  other,  on  account  of  the  adjustment  in  the 
rate  of  interest, —  and  still  some  of  them  do  this  in  spite 
of  elsewhere  demanding  that  creditors  should  receive 
increase  from  progress,  and  recommending  the  labor- 
standard  for  giving  them  such  increase  more  than  the 


344  TOWARD    A    SOLUTION 

commodity  standard  would  do.  Apart  from  this  incon- 
sistency, however,  there  is  no  inconsistency  in  the  other 
difference  of  attitude  toward  the  two  halves  in  the  sub- 
ject of  distribution.  It  is  not  inconsistent  to  maintain 
completeness  of  the  adjustments  in  the  one  relationship 
and  to  deny  it  in  the  other.  The  error  we  shall,  in  fact, 
find  in  an  inversion  of  the  true  position. 

In  both  relationships  the  merely  static  positions  are 
worthless;  and  the  dynamic  positions  are  not  so  simple 
as  they  are  represented.  We  must  examine  the  con- 
ditions in  detail.  First  comes  the  relationship  between 
debtor  and  creditor. 

§3.  In  the  relationship  between  debtor  and  creditor 
we  may  begin  from  the  side  which  alleges  perfect  adjust- 
ment. This  allegation  is  that,  over  long  periods,  what- 
ever be  the  course  of  the  value  of  money,  if  only  it  be 
steady,  there  is  naturally  an  adjustment  of  the  rate  of 
interest  which  makes  the  condition  of  things  between 
debtors  and  creditors  the  same  as  it  would  be  under  any 
other  equally  steady  course  of  the  value  of  money,  pro- 
vided that  certain  moderation  be  observed  in  the  rate  of 
divergence.  Thus  if  the  exchange-value  of  money  be 
gradually  rising  (as  it  would  be  if  money  remained 
stable  in  a  labor- value,  while  progress  is  steady),  it  is 
asserted  that  the  rate  of  interest  is  lower  than  it  would 
be  if  money  were  stable  in  exchange -value  (and  gradu- 
ally falling  in  its  labor- values),  and  that  the  difference 
in  the  two  rates  of  interest,  itself  determined  by  the 
difference  in  the  two  courses  of  the  exchange-value  of 
money,  is  sufficiently  great  to  place  the  debtor  in  the 
same  position  relatively  to  his  creditor,  and  conversely, 
in  either  of  the  cases.  What  is  here  alluded  to,  is 
money- interest,  and  the  supposition  is  that  by  a  change 


ARGUMENT  FROM   RESULTS  345 

in  the  money -interest  the  real  interest  (commodity- 
interest)  is  the  same  in  both  cases.  Experience  does 
not  put  us  in  possession  of  data  actually  iUustrating 
these  suppositions,  but  experience  does  show  that  the 
rate  of  money -interest  has  been  lower  in  periods  when 
money  was  rising  in  exchange -value  than  in  otherwise 
tolerably  similar  periods  when  it  was  stable  or  falling 
in  exchange-value.  In  consequence  of  this  fact,  or  in 
anticipation  of  its  discovery.  Professor  Clark,  followed 
by  Mr.  Holt  and  in  slight  references  by  Professors 
Laughlin  and  Hadley  and  the  Mint  Director  and  others,* 
has  held  that  it  is  indifferent  for  debtors  and  creditors 
whether  money  remains  stable  or  rises  or  falls  in  ex- 
change-value, provided  the  rise  or  fall  be  slight,  steady, 
and  long-continued.  The  argument  is  wider  than  the 
limits  of  our  subject.  For  it  permits  not  only  of  mone- 
tary appreciation  in  exchange -value,  but  also  of  depreci- 
ation in  exchange -value,  which,  in  a  period  of  progress, 
would  be  still  greater  depreciation  in  labor-value.  It 
therefore  does  not  demand  stability  in  labor -value  any 
more  than  stability  in  exchange -value.  But  it  at  least 
negatively  maintains  that  stability  in  exchange -value  is 
no  better  than  stability  in  either  labor-value. 

Two  attacks  have  been  aimed  at  this  position.  Given 
the  steady  course  of  the  exchange -value  of  money,  and 
let  the  proper  rate  of  commodity -interest  be  granted,  t  it 


*See  above,  pp.  22n.  133,  142,  324-5n. 

+  The  rate  of  commodity-interest,  as  already  remarked,  is  itself 
affected  by  the  presence  or  absence  of  progress,  as  it  should  be  higher 
with  progress  than  without  progress,  other  things  being  equal.  But  it  is 
the  position  of  the  advo"ates  of  money  stable  in  exchange-value  that  this 
difference  should  be  brought  about  by  bargaining  at  the  commencement 
of  a  loan,  not  by  altering  the  terms  of  the  contract  afterwards,  or  by 
contractiug  in  a  money  which  gradually  yields  increase  after  an  initial 


346  TOWARD   A    SOLUTION 

is  easj'  in  theory  to  calculate  what  the  rate  of  money- 
interest  ought  to  be  in  order  to  produce  the  alleged 
adjustment.  Now,  it  has  been  shown,  so  far  as  this  can 
be  shown,  in  the  present  state  of  statistical  information, 
by  appeal  to  experience,  that  the  alteration  in  the  rate 
of  money -interest  is  not  so  great  as  it  mathematically 
ought  to  be  in  order  to  reestablish  the  possibility  of 
similar  distribution,  being  really  {i.  e.  in  commodity) 
higher  when  the  exchange -value  of  money  is  rising  and 
really  lower  when  it  is  falling,  than  when  it  is  stable 
(that  is,  when  money -interest  and  commodity -interest 
coincide).  This  shows  that  rising  exchange- value  of 
money  is  more  favorable  to  creditors  and  falling  ex- 
change-value of  money  more  favorable  to  debtors,  in 
each  case  compared  with  the  mean  of  stable  exchange- 
value  of  monej',  although  the  difference  is  not  so  great 
as  it  would  be  but  for  the  partial  adjustment  which 
actually  takes  place.*  Again,  it  has  been  shown,  by 
analysis  of  the  conditions  in  each  case,  that  even  if  the 
alteration  of  money- interest  were  as  great  in  practice  as 
is  demanded  in  the  theory,  it  would  not  reestablish  the 
same  economic  conditions  between  debtors  and  creditors, 
and  that  rising  exchange -value  of  money  would  still  be 
more  favorable  to  creditors  and  less  favorable  to  debtors 
than  a  falling  exchange  -  value,  and  therefore  also, 
though  in  less  degree,   than  stable  exchange -value  of 


reduction  in  money-interest,  which  grives  a  falso  appearance  of  re- 
duetion  in  commodity-interest  (some  of  the  commodity  interest  being 
incorporated  in  the  principal),  as  is  the  case  with  money  rising  in 
exchange-value. 

*This  has  been  worked  out  by  I.  Fisher,  Appreciation  and  interest, 
Publication  of  the  American  Economic  Association,  August  1896,  pp. 
58-76.  It  had  been  suspected  by  Wagner,  Die  neiieste  SilberJcrisis  tind 
unser  MUnzwesen,  Berlin,  1894,  p.  80.     Cf.  also  Darwin,  pp.  255-6. 


ARGUMENT  FROM  RESULTS  347 

money, —  in  other  words,  that  the  theory  itself  is  faulty. 
For  it  is  shown  that  the  similarity  of  conditions  could 
be  restored  only  by  a  further  supposition,  ignored  by  the 
makers  of  the  theory,  and  not  observed  in  practice. 
This  is  that  ^yith  money  rising  in  exchange -value  the 
debtor,  and  with  money  falling  in  exchange -value  the 
creditor,  should  save  what  they  gain  by  the  lowered  or 
raised  money -interest  and  add  it  to  their  capital  as  a 
new  borrowing  or  a  new  investment,  thus  increasing 
from  year  to  year  the  (commodity)  amount  of  their  loan 
or  investment  —  a  complex  operation  not  required  of 
either  party  when  money  is  stable  in  exchange -value, 
and  with  difficulty  executed  by  the  party  concerned 
when  money  is  rising  or  falling  in  exchange-value.* 
These  two  refutations  are  cumulative.  The  last  being 
taken  first,  they  show  that  even  if  the  adjustment  in  the 
rate  of  money -interest  were  as  great  as  demanded  by  the 
theory,  the  restoration  of  equality  of  condition  would 
not  be  effected  in  practice;  that  much  less  effectual  then 
would  be  the  imperfect  adjustment  which  actually  does 
take  place.  Neither  of  these  refutations  has  been  coun- 
termined.! But  if  they  stand,  they  show  that  the  course 
of  the  values  of  money,  by  being  variously  favorable  to 
the  productive  and  to  the  unproductive  classes  of 
society,  must  have  some  influence  upon  the  advance  of 
material  civilization. 

Indeed,  the  greater  advantage  which  the  borrowing 
producers  possess  with  money  stable  in  exchange -value 

*So  in  a  paper  by  the  present  writer  in  the  Quarterly  Journal  of 
Economics,  April  1897. 

t  The  first  seems  to  be  treated  as  so  slight  a  difference  between 
practice  and  theory  as  to  admit  of  being  overlooked.  We  have  seen  it 
so  treated  by  the  Mint  Director.  The  second  has  been  noticed  by  Holt, 
op.  cit.  p.  356n,  without  deigning  to  reply. 


348  TOWARD   A    SOLUTION 

than  with  money  stable  in  labor -value  and  rising  in 
exchange -value,  manifests  itself  in  various  ways.  Mone- 
tary obligations,  once  formed,  remain  constant.  With 
money  of  the  latter  kind,  the  producers'  power  to  meet 
their  obligations,  in  theory,  on  the  average,  also  remains 
constant.  But,  as  their  obligations  increase  in  com- 
modity with  their  power  of  producing  commodities, 
their  power  to  meet  them,  on  the  average,  according  to 
the  hypothesis,  does  not  increase.  Therefore,  while  they 
see  their  creditors,  qua  creditors,  ultimately  absorbing 
the  increase  of  prosperity,  they  see  themselves,  qua 
debtors,  without  profit  from  it  (except  the  initial  one  of 
reduced  interest,  which  may  be  soon  lost  unless  its  true 
nature  is  recognized).  This  comparison  causes  dis- 
couragement in  them,  the  active  workers  and  directors 
of  almost  all  the  work  done  on  any  scale  above  the 
meanest.  There  is  a  tendency,  then,  to  resist  this 
unjust  discrimination  by  attempting  to  keep  prices  from 
falling.  Present-day  teaching  being  against  attempting 
to  do  this  through  purposive  alteration  on  the  money 
side,  its  accomplishment  must  be  striven  for  through 
alterations  on  the  commodity  side.  It  can  be  effected 
by  curtailing  production.  Curtailment  by  individuals 
only  hurts  the  individuals.  Measures  must  be  taken  for 
bringing  about  general  curtailment.  These  are  sought 
first  in  attempts  at  higher  tariffs,  reducing  foreign  com- 
petition and  lessening  trade  both  ways,  that  is,  diminish- 
ing the  total  production  by  diminishing  the  total  con- 
sumption in  all  the  countries  affected.  Then  they  are 
sought  in  attempts  at  combination,  the  formation  of 
so-called  trusts,  which  by  the  exercise  of  a  common 
direction  can  restrict  production  over  a  wide  area  in  the 
same,  and  often  in  allied,  branches  of  industry.     These 


ARGUMENT  FROM  RESULTS  349 

operations  are  encouraged,  if  not  actually  advised,  by 
those  economists  who  talk  of  the  fall  of  prices  being  due 
to  overproduction,  from  which  the  plain  lesson  is  that 
production  should  be  checked.  There  is  another 
tendency  in  the  debtors  who  see  the  favoritism  shown 
their  creditors,  leading  in  the  same  direction.  This  is  the 
tendency  to  pass  from  the  position  of  debtor,  or  under- 
taker of  industry,  to  that  of  creditor,  or  mere  passive 
onlooker.*  Such  is  a  tendency,  in  other  words,  to  pass 
from  working  to  idleness. t  The  consequence  is  less 
production  —  less  advance  of  the  very  civilization  that  is 
so  much  desired.  Although  the  rising  exchange -value 
of  money  that  is  stable  in  the  labor-values  cannot  stop 
the  advance  (for  if  it  did,  it  would  stop  its  own  rising 
in  exchange -value,  and  so  permit  resumption  of  prog- 
resst),  yet  it  may  retard  progress.  The  distribution, 
therefore,  effected  by  money  stable  in  the  labor- values 
isjioubly  wrong.  It  is  wrong  simply  as  unjust,  since  it 
discriminates  between  the  parties  to  a  loan;    and  it  is 

*  Remarkable  advice  to  this  effect  was  given  to  solicitors  and 
attorneys  by  A.  G.  Ellis  in  The  appreciation  of  gold  and  its  probable 
effects  on  investments,  a  paper  read  before  the  Incorporated  Law  Society, 
published  in  London  1893  (republished  1895).  In  one  passage  he  says: 
"If  our  average  young  gentleman  cannot  become  an  'Official '  or  obtain 
an  appointment,  it  is  our  duty  to  recommend  him  to  do  nothing.  Idle- 
ness has  charms  for  many,  and  for  the  gilt-edged  capitalist  (even 
though  a  small  one)  it  has  become  profitable.  This  may  show  an  un- 
healthy state  of  society,  but  for  that  we  are  in  no  way  responsible," 
p.  20  (or  p.  2G). 

tOf  course  the  carrying  out  of  this  tendency  brings  about  its  own 
cure;  for  it  increases  the  competition  of  creditors,  reducing  their 
advantage,  and  it  diminishes  the  competition  of  producers,  reducing 
their  disadvantage.  Then  things  proceed  as  before,  on  a  new  plane. 
But  this  new  plane  is  one  on  which  there  are  more  creditors  and  fewer 
debtors,  that  is,  more  idlers  and  fewer  producers. 

1  Progress  can  be  stopped  altogether,  or  set  backwards,  only  by 
money  rising  also  in  the  labor-values. 


350  TOWARD   A    SOLUTION 

wrong  because  it  favors  the  wrong  class  of  society,_the 
drones,  instead  of  the  working  bees.  Hence  also,  even 
if  money  runs  in  the  other  direction  and  falls  in  ex- 
change-value (in  addition  to  falling  in  the  labor- 
values),  this  condition,  though  still  wrong,  because 
unjust,  is  not  so  wrong  as  the  other,  since  at  all  events 
it  unjustly  favors  the  workers  instead  of  unjustly  favor- 
ing the  idlers.  The  force  of  this  argument  is  not  dimin- 
ished by  the  fact  that  creditors  often  are  workers ;  for  it 
always  remains  true  that  they  are  not  workers  qua 
creditors.  Hence  the  argument,  so  frequently  made 
nowadays,  that  in  modern  economic  conditions  the 
majority  of  creditors  belong  to  the  middle  and  lower 
classes  of  society  and  consequently  deserve  encourage- 
ment—  why  unjustly,  can  hardly  be  surmised, —  is 
utterly  of  no  avail.  When  a  person  is  both  creditor 
and  laborer,  the  question  how  much  he  ought  to  be 
benefited  in  each  of  these  capacities  can  be  best  decided 
by  comparing  men  who  are  solely  creditors  with  men 
who  are  solely  laborers.  And  similarly,  when  a  person 
is  both  creditor  and  debtor,  the  question  how  much  he 
ought  to  be  benefited  in  each  of  these  capacities  can  be 
best  decided  by  comparing  men  who  are  solely  creditors 
(and  consumers)  with  men  who  are  solely  debtors 
(and  producers  with  the  aid  of  their  borrowed  capital). 
The  actual  numbers  of  creditors  and  debtors  can  have 
nothing  to  do  with  the  subject;  for  although  these  num- 
bers may  be  different,  the  total  amounts  borrowed  and 
the  total  amounts  lent  must  always  balance.  To  appeal 
to  the  mere  numbers  of  the  creditors,  or  to  their  position 
in  the  under  strata  of  society,  is  mere  demagogism. 

The  salient  feature  in  the  argument  from  the  mutual 
relationship  of  debtor  and  creditor  is,  then,  that  so  far 


ARGUMENT  FROM  RESULTS  351 

as  it  proves  anything  it  proves  the  existence  of  a 
tendency  to  smaller  production  with  money  stable  in 
labor-value  than  with  money  stable  in  exchange-value.* 
And  now,  as,  in  the  former  case,  more  of  the  lessened 
products  go  to  the  creditors,  there  is  still  less  for  distri- 
bution between  the  two  classes  of  producers,  the  borrow- 
ing undertakers  and  their  employees,  which  forms  the 
next  subject  of  discussion. 

§4.  In  the  case  of  distribution  between  emploj-ers 
and  employees,  it  is  plain  that  while  money  is  varying 
in  one  or  another  kind  of  value,  the  same  distribution 
might  be  effected  by  altering  the  rate  of  wages  (and 
salaries).  Here  the  adjustment  is  much  simpler  than 
in  the  previous  case,  both  because  wages  are  generally 
contracted  for  in  shorter  terms,  and  because  wages 
are  like  interest  alone,  or  rather  like  the  payment 
of  annuities,  there  being  no  complication  arising  from 
the  repayment  of  an  original  principal.  In  the  relation- 
ship between  borrowers  and  lenders  the  course  of  the 
values  of  money  affects  both  the  values  of  the  interest 
and  the  values  of  the  principal,  and  the  two  run  to- 
gether almost  inextricably.  But  in  the  relationship 
between  employers  and  employees  the  course  of  the 
values  of  money  affects  only  the  wages  themselves. 
Consequently  the  adjustment  by  means  of  wages  may  be 
much  more  complete  than  by  means  of  interest.  Yet  even 
here  it  is  possible  that  the  rate  of  money -wages  will  not 
be  in  practice  as  it  ought  to  be  in  order  to  maintain  the 
same  rate^r,  with  progress,  the  same  advance  in  the 
rate,  of  real  wages  (commodity-wages),  under  money 
stable  or  varying  in  one  kind  of  value  as  under  money 

*It  is  significant  that  no  attempt  has  ever  been  made  to  prove  the 
converse  of  this. 


352  TOWARD    A    SOLUTION 

stable  or  oppositely  varying  in  another  kind  of  value. 
It  has  generally  been  maintained  that  with  money  falling 
in  exchange -value  the  rate  of  wages  does  not  increase 
fast  enough,  giving  advantage  to  the  employers,  and 
with  money  rising  in  exchange -value  the  rate  of  wages 
does  not  fall  as  fast  as  the  level  of  prices,  giving  ad- 
vantage to  the  employees.  This  position  is  what  lends 
importance  to  the  argument  drawn  from  wages,  leading 
to  the  conclusion  that  money  ought  to  fall  in  exchange- 
value  and  remain  stable  in  esteem-value  or  cost-value. 
From  the  static  standpoint  we  have  seen  the  argument 
to  be  ineffectual.  It  becomes  effective  only  from  the 
dynamic  standpoint,  v  From  this  standpoint  it  can  be  of 
importance  only  if  proof  be  proffered  that  real  wages 
advance  more  rapidly  with  monej'  rising  in  exchange- 
value  and  stable  in  esteem -value  or  cost- value  than  with 
money  stable  in  exchange -value  and  falling  in  the  labor- 
values.  In  this  form  the  argument  has  been  very 
imperfectly  worked  out.  On  the  one  hand,  the  contrast 
has  generally  been  drawn  between  the  condition  of  real 
wages  under  money  rising  in  exchange-value,  without 
regard  to  its  stability  in  other  kinds  of  value,  and  their 
condition  under  money  not  stable  but  falling  in  ex- 
change-value; and,  on  the  other  hand,  even  this 
contrast  has  generally  been  spoilt  by  not  eliminating 
disturbing  influences  coming  from  disordered  states  of 
credit,  which  have  been  allowed  in  the  comparison  on 
the  one  side  much  more  than  on  the  other.  Recently 
an  investigator  has  found  reason  to  believe  that  the  ad- 
vance in  real  wages  is  as  great  in  a  period  of  money 
falling  in  exchange-value,  with  undisturbed  credit,  as 
in    a    period    of    money    rising    in    exchange-value.* 

*  F.  S.  Kinder,  The  effects  of  recent  changes  in  monetary  standards 


ARGUMENT  FROM  RESULTS  353 

A  fortiori,  then,  the  advance  in  real  wages  would  be  as 
great  in  a  period  of  money  stable  in  exchange -value. 
Such  is  the  empirical  argument,  which  in  the  present 
state  of  statistical  investigation  is  most  unsatisfactory. 
Let  us,  therefore,  turn  to  the  a  priori  argument,  upon 
which  reliance  has  usually  been  placed. 

In  the  general  argument  from  distribution  more 
emphasis  has  been  laid  by  the  champions  of  monetary 
stability  in  labor-value  upon  the  distribution  between 
employers  and  employees.  Indeed,  as  regards  the  dis- 
tribution between  debtors  and  creditors,  they  are,  in 
the  argumentation  from  results,  frequently  on  the  de- 
fensive, trying  to  make  out  that  the  conditions  with 
money  stable  in  labor-value  approximate  toward  the 
conditions  with  money  stable  in  exchange-value.  But 
in  regard  to  the  distribution  between  employers  and 
employees  their  attitude  becomes  aggressive.  Here  they 
insist  that  the  best  condition  is  provided  by  money  stable 
in  a  labor-value,  or  at  all  events  with  money  rising  in 
exchange -value,  and  deny  that  the  condition  provided 
by  money  stable  in  exchange-value  approximates  to 
this.  They  do  so  entirely  on  the  ground  that  the 
former  conditions  are  more  favorable  than  the  latter 
to  the  employees,  treating  the  interests  of  the  em- 
ployers as  if  undeserving  of  consideration.  The  static 
argument  for  this  position  is  mostly  confided  in, 
although  we  have  seen  it  to  be  worthless.  Dynamic 
arguments  are  sometimes  provided.  We  have  quoted 
two,  from  Mr.  Forssell  and  our  Mint  Director.*  The 
one  was  an  argument  from  the  advantage  of  position 


upon   the  distribution  of  wealth,   Economic    Studies  of  the   American 
Economic  Association,  Dec.  1899,  pp.  462-94. 
*  See  above,  p.  274. 

W 


354  TOWARD   A    SOLUTION 

possessed  by  laborers  in  maintaining  their  money -wages 
and  salaries,  and  thereby  partaking  of  the  benefits  of 
material  progress,  if  prices  are  falling;  and  the  other 
was  the  similar  argument  that  their  partaking  of  these 
benefits  proceeds  more  automatically,  and  with  less  fric- 
tion, by  their  merely  maintaining  their  money-wages  and 
salaries,  than  by  their  seeking  to  raise  them,  as  they 
needs  must  do  if  they  are  to  benefit  by  progress  with 
money  stable  in  exchange -value. 

To  judge  the  validity  of  this  argument  we  must  care- 
fully distinguish  between  the  income  standard,  the 
earnings  standard,  and  the  wages  standard  proper. 
Under  the  income  standard  the  object  is  merely  to  keep 
stable,  on  an  average,  all  money-incomes,  including 
rents,  interests,  dividends,  profits,  as  well  as  salaries  and 
wages.  This  comprehensive  result  might  be  obtained, 
and  3^et  money -salaries  and  money-wages  might  be  fall- 
ing, the  other  classes  of  society  appropriating  more 
money-income,  so  that  perhaps  the  salary -earners  and 
wage -earners  are  being  deprived  of  some  of  the  benefits 
of  piogress  that  are  due  them.  Similarly,  under  the 
earnings  standard,  from  which  rents  and  interest  are 
excluded.  Here,  again,  the  standard  might  be  observed, 
and  yet  money -profits  might  rise  and  money -salaries 
and  money-wages  fall,  so  that  here,  too,  the  employees 
would  not  be  sharing  in  the  advantages  of  progress  in 
the  way  alleged,  their  employers  engrossing  some  of 
their  share.  As  for  the  wages  standard  proper,  it  is 
true  that  if  money-wages  and  money -salaries  were  stable 
and  if  prices  fell  in  proportion  to  the  improvements  in 
production,  the  benefits  of  progress  would  automatically 
go  to  the  laborers.  But  there  is  nothing  in  the 
wages   standard    itself    to   guarantee   the   second   con- 


ARGUMENT  FROM  RESULTS  355 

dition  required.  Nor  is  this  condition  an  economic 
necessity.  A  state  of  things  is  possible  in  which  money- 
salaries  and  money-wages  are  stable,  and  j'et  money- 
profits  are  rising,  by  the  employers  keeping  prices  from 
falling  as  fast  as  they  might,  and  so,  again,  engrossing 
to  themselves  more  of  the  benefits  of  progress  than  is 
their  due.  At  all  events,  such  engrossing  on  the  part  of 
the  employers  is  as  practicable  under  this  monetary 
system  as  under  any  other  stable  one.  Then  the 
advocate  of  this  monetary  system,  guided  merely  by 
the  wages  standard,  would  have  to  be  content  with  such 
a  condition  on  the  ground  that  his  standard  is  observed. 
Or  rather,  while  he  could  not  advise  the  laboring  classes 
to  strike  for  a  rise  of  money -wages,  since  this  would  be 
contrary  to  his  principle,  the  advisee  he  should  have  to 
give  them  would  be  that  they  ought  to  strive  to  bring 
about  a  proper  fall  of  prices.  Whether  such  an  under- 
taking, on  the  part  of  employees,  who  have  nothing  to 
do  with  the  conduct  of  business,  would  be  easier  for 
them  to  accomplish  than,  in  a  state  of  stable  prices,  to 
strive,  and  to  succeed  in  striving,  for  a  rise  of  wages, 
in  the  contracting  for  which  they  are  one  of  the  parties, 
is  a  counter -question  that  may  well  be  asked  of  those 
who  think  it  easier  for  laborers  to  get  the  benefits  of 
progress  by  merely  maintaining  their  money-wages  than 
by  raising  them.  In  this  position  it  is  forgotten  that  if 
laborers  maintain  their  wages,  under  the  wages  stand- 
ard, this  alone  is  not  enough,  since  they  must  also  see 
to  it  that  prices  fall  properly.  Thus  in  all  its  three 
divisions  the  labor  standard,  of  itself,  does  not  show 
whether  the  relations  between  emploj^ers  and  employees 
are  healthy  or  unhealthy.  It  may  be  replied  that  neither 
does  the  commodity  standard.     If  prices  are  stable,  em- 


356  TOWARD   A    SOLUTION 

ployers  may  still  oppress  their  employees  by  taking  too 
large  a  share  in  money -profits  and  assigning  to  them 
too  small  a  share  in  money -wages.  This  is  true;  Wt_ 
the  commodity  standard  does  not  pretend,  like  the  other 
standards,  to  show  to  laborers  that  they  are  getting  their 
proper  share  of  the  benefits  of  progress.  It  leaves  such 
a  question  to  statistical  investigation,  and  it  beguiles 
laborers  with  no  false  pretense,  but  leaves  their  fate  in 
their  own  hands. 

The  main  point  is,  however,  that  as  regards  wages 
I  there  is  no  automatic  help  to  just  distribution  provided 
:  by  money  stable  in  any  of  the  ways  under  consider- 
I  ation.  As  regards  salaries,  in  the  one  class  of  govern- 
ment salaries,  there  is  some  advantage  in  money  being 
stable  in  esteem -value.  For  the  salaries  of  clerks,  of 
department-heads,  of  judges,  of  soldiers,  of  diplomats, 
and  of  governors  and  presidents,  ought  to  be  stable  in 
esteem -value  with  the  advance  of  prosperity,  and  there- 
fore to  rise  in  purchasing  power;  but,  being  established 
by  the  cumbrous  machinery  of  legislative  enactment, 
they  are  rarely  altered  in  their  money  amount.  Hence 
with  money  stable  in  esteem-value,  such  salaries,  if  once 
proper,  would  remain  proper  without  need  of  alteration 
in  money  amount  (except  for  the  infrequently  needed 
re -arrangement  between  the  kinds  of  employment) .  Yet 
this  is  but  a  small  argument  in  behalf  of  the  labor 
standard,  since  the  monetary  adjustment  admits  of 
being  made,  and  indeed  has  been  made,  even  by  legis- 
lation; and  it  is  easier  to  make  this  correction,  and  less 
harm  comes  from  neglect  of  it,  than  is  the  case  in 
matters  where  it  is  desirable  that  money  should  be 
stable  in  exchange- value.  But  as  for  other  salai'ies  and 
wages,  these  are  obtained  in  short  contracts  and,  as  a 


ARGUMENT  FROM  RESULTS  357 

fact,  are  perpetually  changed.  There  seems  to  be  a  con- 
tinual contest  to  raise  and  to  depress  such  salaries  and 
wages,  especially  the  latter;  and  there  is  every  reason 
to  suspect  that  this  contest  is  as  great,  and  consequently 
with  as  much  friction,  whatever  be  the  behavior  of 
money,  if  steady  and  regular.  But  the  contest  is  for 
the  real  things  conveyed  in  the  money -salaries  and 
money-wages, —  it  is  for  commodity -salaries  and  com- 
modity-wages. Therefore,  if  money  remains  stable  in 
exchange -value,  or  in  purchasing  power  over  com- 
modities, the  terms  in  which  the  contest  is  conducted 
a^e  stable.  Then  both  parties  know  exactly  what  they 
are  gaining  and  losing  by  any  change  in  money -salaries 
<:^_  money -wages.  But  with  money  stable  in  labor- 
value,  the  terms  of  the  contest  are  not  known  unless  it 
be  kuowu  how  much  prices  on  the  average  are  changing; 
which  is  an  extra  matter  as  regards  that  standard.  In 
other  words,  money  stable  in  exchange -value  provides 
to  both  sides  the  best,  because  equal,  weapons.  While 
not  procuring  for  the  laborers  an  advantage  of  position, 
to  which  they  are  not,  by  any  apparent  reason,  entitled, 
it  does  not  put  them  at  a  disadvantage  by  engendering 
the  delusive  idea  that  they  are  rightly  partaking  of  the 
benefits  of  progress  when  perhaps  they  may  be  far  from 
doing  so.  Wage-earners  have  at  all  times  and  in  all 
cases  to  be  watchful  to  see  that  they  get  their  share  of 
progress.  The  saying  "Eternal  vigilance  is  the  price  of 
liberty"  is  only  part  of  a  more  general  truth  that,  in 
this  world,  at  least  as  regards  material  concerns,  eternal 
vigilance  is  the  price  of  getting  one's  due.  It  would 
seem,  then,  that  a  state  of  stable  prices,  which  will 
excite  wage -earners  to  look  for  higher  wages  when  they 
see  their  employers  making  larger  profits,  is  the  best  to 


358  TOWARD    A    SOLUTION 

keep  them  awake  to  their  own  interests.  Otherwise, 
with  confusion  as  to  the  terms  of  their  contracts,  it  is 
much  more  likely  that  the  employers,  than  the  em- 
ployees, will  derive  unfair  advantage. 

With  the  above  small  concession  in  favor  of  the 
labor  standard,  and  with  this  slight  presumption  in 
favor  of  the  commodity  standard,  employees  are,  in  the 
long  run,  likely  to  get  their  share  in  progress,  in  com- 
parison with  their  employers,  as  well  under  one  steady 
monetary  system  as  under  another.  The  adjustment, 
in  the  case  of  salaries  and  wages,  over  against  profits,  is 
likely  to  be  complete.*  What  should  decide  the  ques- 
tion is  the  opinion  as  to  which  kind  of  money  is  most 
conducive  to  advance  of  general  prosperity.  This  is 
necessarily  connected  with  the  opinion  as  to  which  kind 
of  money  is  most  conducive  to  advance  of  prosperity  of 
the  productive  classes  of  society,  with  due  consideration 
for  the  just  rights  of  the  idle  lenders  of  productive  cap- 
ital. As  affected  by  the  monetary  standard,  the  interests 
of  employees  are  wholly  bound  up  with  the  interests  of 
employers,  since  they  together  constitute  the  productive 
classes.  The  interests  of  these  two  parties  may,  in 
many  matters  of  detail,  be  antagonistic;  but  their  in- 
terests are  held  in  common  over  against  the  creditors  of 
the  employers.  Any  monetary  system  that  is  prejudicial 
to  the  borrowing  undertakers  of  industry,  in  undue 
favor  of  their  creditors,  is  also  prejudicial  to  the 
laborers  employed  by  those  undertakers.     Laborers,  so 

*McVey,  whom  we  have  noticed  as  an  advocate  of  the  single  gold 
standard  for  helping  wage-earners  by  its  appreciation  in  exchange-value, 
yet  says:  "In  the  long  run,  whether  the  money  be  good  or  poor,  labor  is 
apt  to  secure  for  its  service  about  the  amount  of  return  that,  in  view  of 
other  social  and  political  conditions,  it  would  in  any  case  receive," 
op.  cit.  p.  4. 


ARGUMENT   FROM   RESULTS  359 

called,  ought  to  distinguish  between  capitalists  who  use 
capital  and  capitalists  who  part  with  it.  Creditors  alone 
are  the  latter;  the  former  are  debtors,  as  well  as  the  few 
persons  who  use  only  their  own  capital.  The  harmony 
of  interests  between  labor  and  capital,  so  often  insisted 
upon,  is  a  harmony  of  interests  between  employed 
laborers  and  employing  capitalists,  among  whom  are  the 
debtor  capitalists  but  not  the  creditor  capitalists.  There 
is  a  harmony  of  interests  also  between  the  debtor  and 
the  creditor  capitalists;  but  between  these  there  is,  in 
regard  to  money  values,  likewise  an  antagonism  of  in- 
terests, and  in  this  antagonism  laborers  should  side  with 
the  debtor  capitalists.  By  siding  with  the  creditor  cap- 
italists to  the  injury  of  the  debtor  capitalists,  laborers 
cannot  but  hurt  themselves. 

§5.  In  this  line  of  argumentation  an  element  is 
generally  neglected  that  would  seem  to  call  for  attention. 
As  regards  the  relationship  between  debtors  and  credi- 
tors it  is  not  deemed  sufficient  to  say  merely:  Money 
ought  to  be  stable  in  exchange -value  because  in  a  state 
of  progress  such  money  favors  debtors ;  or  again :  Money 
ought  to  be  stable  in  a  labor -value  because  then  it  favors 
creditors.  Additional  reason  is  demanded  not  only  to 
prove  whether  or  no  such  favoritism  exists,  but  also 
to  show  which  party  deserves  it  more.  In  preceding 
pages  the  endeavor  has  been  to  establish  that  money 
stable  in  labor-value  and  falling  in  exchange-value  does 
favor  creditors,  and  that  these  do  not  deserve  such 
favor;  and  that  money  stable  in  exchange -value  does 
not  favor  either  party,  debtors  being  favored  only  by 
money  falling  in  exchange -value,  which,  therefore,  is 
at  least  not  so  bad  as  money  rising  in  exchange -value, 
because  if  either  of  the  two  parties  is  to  be  favored  it 


360  TOWARD   A    SOLUTION 

should  be  the  producing  debtors  rather  than  the  idle 
creditors.  However  this  be,  it  is  at  all  events  admitted 
that  the  claims  of  the  two  parties  to  favor  should  be 
taken  into  consideration.  And  the  advocates  of  money 
stable  in  a  labor-value  and  rising  in  exchange -value 
make  statements  pretending  to  evince  that  creditors  at 
least  deserve  as  much  favor  as  debtors  —  never  claiming 
more.  Now,  in  the  matter  before  us,  concerning  the  dis- 
tribution between  employers  and  emploj'ees,  there  ought 
to  be  the  same  deliberation  upon  the  merits  of  the 
respective  parties  and  upon  the  justness  of  their  claims 
to  special  favor.  Here,  however,  the  advocates  of 
money  stable  in  a  labor-value  and  rising  in  exchange- 
value  simply  content  themselves  with  asseverating  that 
with  such  money  the  advantages  of  advancing  civili- 
zation go  more  to  the  employees  than  to  the  employers, 
or  at  least,  more  to  the  employees  than  they  would  go 
to  them  if  money  were  stable  in  exchange-value.  But 
the  same  question  arises  here  as  to  whether  it  is  right 
and  just  that  the  employees  should  get  more  than  the 
employers,  or  whether,  if  indeed  it  is  true  that  they  get 
more  in  the  one  case  as  alleged,  it  is  right  and  just  that 
they  should  get  this  increase.  To  say  that  employees 
are  poor  and  therefore  deserve  more  favor,  might  be 
valid  over  against  idle  creditors,  but  is  not  so  over 
against  working  debtors.  To  be  sure,  if  it  could  be 
shown  that  with  money  stable  in  a  labor- value  and  ris- 
ing in  exchange-value  employees  get  the  whole  advan- 
tage from  advancing  civilization  and  that  with  money 
stable  in  exchange-value  they  get  none,  the  employers 
getting  it  all,  there  would  be  no  question  but  that  the 
employees  ought  to  get  some  of  the  advantage  and 
therefore  that  money  ought  not  to  be  stable  in  exchange- 


ARGUMENT  FROM  RESULTS  361 

value  and  ought  to  rise  somewhat,  though  not  enough 
to  give  it  all  to  the  employees,  a  compromise  resulting 
in  the  mean.  But  this  is  not  the  case.  The  most  that 
is  pretended  is  that  with  money  rising  in  exchange- 
value  employees —  at  least  some  of  them  —  get  more  of 
the  benefits  of  progress  and  the  employers  less  than  they 
would  get  with  money  stable  in  exchange-value.  But 
this  is  evidently  not  enough.  The  question  of  justice/ 
is  still  left  over.  If  such  argument  is  to  be  made,  it  is 
necessary  for  the  advocates  of  money  stable  in  a  labor- 
value  and  rising  in  exchange -value  to  prove  that  with 
this  money  employees  get  exactly  what  they  are  entitled 
to  and  eraplo3-ers  not  less  than  they  deserve,  and  that 
with  money  stable  in  exchange -value  employees  get  less 
and  employers  more  than  they  each  ought  to  get.  This 
these  advocates  do  not  attempt  to  make  out.  Perhaps 
the}'  maj'^  say  that  the  advocates  of  money  stable  in 
exchange -value  ought  to  vindicate  their  position  in  a 
similar  manner,  by  showing  that  with  money  stable  in 
exchange -value  the  distribution  between  the  two  classes 
is  exactly  what  it  ought  to  be.  But  the  advocates  of 
money  stable  in  this  kind  of  value  may  well  decline  such 
a  task.  They  need  make  no  such  comparison  of  the 
actual  with  the  ideal.  All  they  need  avow  is  that  such 
money  favors  neither  of  the  parties  at  the  expense  of 
the  other  —  that  it  is  impartial  here,  as  it  is  between 
debtors  and  creditors.  They  may  assert,  too, —  for  this 
seems  to  be  borne  out  by  facts, — that  even  if  money 
gradually  rises  in  exchange -value,  as  it  does  when 
stable  in  a  labor-value,  it  does  not  appreciably  favor 
the  employees  over  against  their  employers,  even  if  the 
employers  be  not  borrowers,  and  especially  then  cannot 
do  so  if  the  emploj^ers  be  borrowers  and  are   injured 


362  TOWARD    A    SOLUTION 

over  against  their  creditors;  as  also  that  if  money  falls 
slightly  and  gradually  in  exchange -value,  even  this  does 
not  appreciably  favor  the  employers  over  against  their 
employees,  and  especially  does  not  injure  the  employees 
if  the  borrowing  employes  are  being  favored  over 
against  their  creditors. 

§  6.    In  concluding  the  subject  of  distribution,  it  de- 
serves remark  that  money  has  not,  properly  speaking, 
any   function    of   distributing   wealth   to   the   different 
classes  of  society.     Money,  besides  being  the  medium  of 
exchange,  is  a  measure  and  a  store  of  value;   but  it  is 
not  a  distributor  of  wealth.     The  question  of  justice  is, 
then,   properly,   whether  money  behaves  rightly  in  its 
'  functions  of  measuring  and  storing  value,  and  what  this 
i  value  ought  to  be  which  its  function  is  to  measure  and 
j  to  store.     Upon  this  subject,  therefore,  we  may  theorize, 
and  after  reaching  a  conclusion,  may  want  money  to  be 
such  as  to  carry  out  our  theory.     But  money  is  not 
properly    an    agent   for    the    execution    of    anybody's 
t¥eory  as  to  what  ought  to  be  the  proper  distribution 
of   the  "benefits    of  improvements   between    the    several 
classes  of  society.     A  person  may  think,  for  instance, 
that  creditors  ought  to  share  equally  in  such  benefits 
with  debtors,    but    he  would    hardly   conclude  that   if 
a    day's    labor    at     weaving     enlarges    its    output    of 
cToth,  the  yard  by  which  the  length  of  cloth  is  meas- 
ured   and   which    is  employed  in  contracts   for    future 
delivery,  ought  to  grow  in    length  half  as   fast  as  the 
output   expands,   in    order   to   divide  the  improvement 
equally  between  the  contracting  parties.     We  may  rest 
assured  that  it  is  only  by  being  a  stable  measure  of 
what   it  measures  the  ideal   unit   can   be  a   handmaid 
of  justice. 


ARGUMENT   FROM   RESULTS  363 

Yet  it  is  even  possible  for  us  to  hold  both  the 
doctrine  that  money  is  the  measure  of  exchange-value 
and  ought  to  be  stable  in  exchange -value,  and  the 
doctrine  that  persons  who  retire  from  business  or  who, 
continuing  to  work,  invest  their  savings,  ought  to  re- 
ceive some  share  in  the  advance  of  material  civilization 
taking  place  after  their  retirement,  and  to  get  such  in- 
crease from  their  investments.  But  certainly  we  ought 
to  couple  with  this  latter  doctrine  the  proviso  that  the 
persons  who  want  such  increase  from  their  investments 
ought  to  run  the  risks  of  loss  that  arise  from  the  very 
advance  of  material  civilization  from  which  they  are 
seeking  to  get  increasing  profit.  Now,  our  modern  in- 
dustrial arrangements  present  to  every  investor  exactly 
this  opportunity  of  gain,  coupled  with  risk  of  loss. 
Instead  of  loaning  his  capital  to  other  persons,  or  buy- 
ing bonds,  the  money-holder  can,  so  to  speak,  loan  his 
money  to  a  legal  person  of  which  he  himself  forms  a 
part,  but  which  requires  no  labor  from  him,  by  buying 
shares  or  stocks  of  a  corporation.  In  this  way,  it  isi 
dividends  and  selling-out  and  winding-up  returns,  and 
not  interest  and  repayment  of  principal,  that  are  the 
proper  modes  of  distributing  the  gains  arising  from  im- 
provements —  or  the  losses  befalling  from  the  same.  To 
be  sure,  there  are  losses  coming  from  loans,  and  so  there 
are  risks  in  lending  money.  But  it  is  the  very  object  of 
lending  money  to  reduce  the  risks  to  a  minimum;  and, 
at  least  in  theory,  the  risks  on  a  loan  are  nil,  while  in 
share-taking  the  running  of  risks  and  uncertainty  of 
returns  is  an  essential  feature  in  the  investment.  On 
the  other  hand,  if  money  is  to  be  stable  in  esteem- 
value  or  cost-value,  so  that  the  gains  from  improve- 
ments   go  to  the  money-lender  without  risk,  or   with 


364  TOWARD    A    SOLUTION 

minimized  risk,  the  distinction  between  share  -  taking 
and  money-lending  ceases. 

In  such  argument  for  money  stable  in  exchange- 
value,  no  ill-will  is  shown  to  the  creditor  class.  Indeed, 
sensible  people  could  never  wish  to  injure  the  creditor 
class.  The  status  of  creditor  or  lending  capitalist  is  the 
goal  toward  which  all  workers  work,  and  it  is  not  to  the 
interest  of  workers  that  this  status  should  suffer  injus- 
tice. But  this  status  is  not  injured  by  a  condition 
which,  in  good  loans,  without  risk,  assures  a  constant 
return  in  exchange -value.  If  the  retired  capitalist  de- 
sires gain  which  he  does  not  himself  actively  earn,  the 
unearned  increment  can  always  be  obtained  from  the 
above-mentioned  stock-investments,  or,  too,  by  land 
speculation, —  coupled,  as  it  ought  to  be,  with  chance  of 
unearned  decrement.  But  it  would  be  unjust  for  gov- 
ernment, if  it  were  the  regulator  of  the  value  of  money, 
to  supply  a  money  that  should  grant  to  idle  capitalists  a 
sure  method  of  obtaining  unearned  increment  without 
accompanying  risk  of  unearned  decrement. 

As  for  the  relationship  between  emploj'er  and  em- 
ployee, it  would  seem,  to  repeat,  that  the  question  of 
distribution  need  have  little  influence  upon  our  decision. 
If  at  any  time  it  turns  out  upon  investigation  that  with 
money  stable  in  exchange -value  real  wages  are  not  so 
high,  or  the  advance  in  real  wages  is  not  so  great,  as 
some  of  us  may  think  proper,  it  would  seem  that  some 
means  or  regulation  could  be  devised  to  increase  them, 
or  to  hurry  their  advance;  so  that  he  who  holds  on 
other  grounds  the  proper  stability  of  money  to  be  in  ex- 
change-value could  still  hold  this  position  while  desir- 
ing, and  urging  means  for  obtaining,  higher  wages  or  a 
greater   advance.     Here,    then,    the   instrumentality  of 


ARGUMENT  FROM  RESULTS  365 

money  as  the  distributor  of  wealth  does  not  seem  to  be 
a  factor  of  importance. 

§7.  The  line  of  reasoning  by  which  our  problem 
may  perhaps  be  finally  settled  is  based  upon  the  general 
principle  of  utility,  not  of  any  class  or  classes,  but  of 
the  whole  community,— the  greatest  happiness  of  the 
greatest  number.  Does  the  community  as  a  whole 
prosper  more  when,  with  improving  production,  prices 
fall  in  conformity  with  the  improvements,  or  when, 
with  improving  production,  prices  remain  stable!  Or 
which  of  these  behaviors  of  monej'  conduces  more  to  the 
prosperity  of  the  whole  community  and  thereby  also 
more  helps  on  the  improvement  of  production?  These 
are  questions  of  fact.  But  economics,  unlike  physics 
and  chemistrj^  is  not  an  experimental  science.  We  can- 
not provide  ourselves  with  two  communities,  or  with  one 
community  at  two  periods,  in  all  other  respects  exactly 
alike,  and  give  to  the  one  a  system  of  money  stable  in 
esteem -value  or  cost -value  and  to  the  other  a  system  of 
money  stable  in  exchange -value,  and  then  look  on  and 
see  which  prospers  the  more.  Or  treating  economics 
merely  as  an  observational  science,  we  are  not  sure  that 
we  can  put  our  finger  upon  two  periods  in  which  a  com- 
munity has  experienced,  for  sufficient  lengths  of  time,  a 
money  stable  in  the  one  kind  of  value  and  then  a  money 
stable  in  the  other  kinds;  and  much  less  can  we  affirm 
that  in  all  other  respects  this  community  was  subject  to 
the  same  economic  conditions.  We  can  only  use  induc- 
tion from  a  few  facts  here  and  a  few  facts  there,  elimi- 
nating what  we  otherwise  know  to  be  effects  of  other 
causes,  and  tracing  connections  between  facts  that  are 
generally  found  together.  This  empirical  inquiry  may 
proceed  in  two  different  ways.     The  one  is  by  analysis 


366  TOWARD    A    SOLUTION 

of  details.  The  other  is  by  surveys  of  general  trends,  so 
far  as  statistical  information  is  procurable.  The  former 
has  been  slightly  touched  upon  in  the  above  examina- 
tion of  the  influence  of  distribution.  The  latter  cannot 
be  entered  upon  in  this  work,  and  we  can  peer  at  it  only 
from  the  threshold.  Those  who  continue  the  pursuit 
should  remember  that  in  investigations  of  this  sort  the 
question  is  only  of  degrees.  In  the  period,  for  instance, 
between  1850  and  1873  there  was  material  progress  with 
money  that  was  not  stable  but  falling  in  cost -value  and 
esteem -value.  Was  that  progress  so  great  as  it  would 
have  been  with  money  stable  in  cost -value  or  esteem- 
value?  In  the  period  between  1873  and  1896  there  was 
material  progress  with  money  not  stable  but  rising  in 
exchange -value.  Was  that  progress  so  great  as  it 
would  have  been  with  money  stable  in  exchange-value? 
In  proving  that  money  ought  to  be  stable  in  exchange- 
value,  it  is  not  sufficient  to  point  to  the  progress  between 
1850  and  1873  when  money  was  nearer  to  stability  in 
exchange -value  than  to  stability  in  the  other  kinds  of 
value.  And  for  proving  that  money  ought  to  be  stable 
in  cost-value  or  esteem-value,  it  is  not  sufficient  to 
point  to  the  progress  between  1873  and  1896  when 
money  was  nearer  to  stability  in  cost -value  or  esteem- 
value  than  to  stability  in  exchange -value.  Truth  may 
be  elicited  rather  by  a  comparison  of  the  two  periods, 
and  of  all  other  periods  about  which  statistical  informa- 
tion may  be  collected.  Such  investigations  are  the  best 
means  of  settling  our  problem.  They  would  require 
volumes  by  themselves. 

§8.  In  default  of  such  investigations,  some  weight 
of  probability  is  derived  from  the  existence  of  a  com- 
mon opinion  upon  this  subject,  which  may  be  regarded 


ARGUMENT  FROM  RESULTS  367 

as  an  outgrowth  of  general  experience.  There  exists  a 
common  opinion  that  the  rising  of  prices  is  better  than 
the  falling  of  prices,  and  debate  concerning  this  opinion 
and  the  opposite  is  not  infrequent,  and  even  among 
economists  there  has  been,  perhaps,  a  majority  in  favor 
of  the  former  opinion.  And  all  this  is  independent  of 
any  question  about  the  condition  of  monej-  with  regard 
to  its  stability  or  variation  in  cost- value  or  esteem -value. 
Now,  the  existence  of  such  opinion,  or  of  the  possibility 
of  such  debate,  is  very  significant.  Ever  since  the 
beginning  of  what  historians  call  modern  times,  about 
four  centuries  ago,  the  European  and  American  worlds 
have  been  in  a  state  of  economic  progress,  with  enlarg- 
ing command  over  nature,  and  with  expanding  wealth. 
Through  all  this  epoch,  then,  there  has  been  a  general 
fall  of  cost-value  and  esteem-value,  the  fall  now  hap- 
pening in  one  kind  of  commodity  and  now  in  another, 
and  proceeding  on  the  whole  with  very  little  intermis- 
sion. If,  then,  it  is  the  right  position  that  money 
ought  to  be  stable  in  one  of  the  labor-values,  prices 
ought  to  have  fallen  on  the  average  almost  continuously, 
and  by  now  tremendously.  Instead,  they  have  not  even 
remained  constant  on  the  average,  but  have  risen,  and 
during  these  four  centuries  but  few  periods  can  be 
pointed  to  when  prices  fell.  It  would  seem  that  if  that 
view  of  money  were  correct,  there  ought  to  have  been 
many  complaints  about  prices  not  falling.  There  have 
at  times  been  complaints  about  prices  rising;  but  these 
can  be  more  than  matched  by  complaints  about  the 
falling  of  prices,  and  it  would  seem  that  there  have  never 
been  complaints  about  prices  remaining  stable.*     On 


*  We  have  quoted  Wisner's  assertion  that  if  recently  prices  had  not 
fallen  there  would  have  been  a  greater  panic  than  there  has  been.     It 


368  TOWARD    A    SOLUTION 

the  contrarj'-,  we  have  seen  that  there  has  rather  been  the 
opinion  that  prices  ongjht  even  to  rise  preferably  to  fall- 
ing. Such  an  opinion  is  perfectly  consistent  with  the 
doctrine  that  money  ought  to  be  stable  in  exchange- 
value;  for  a  deviation  upon  the  one  side  of  the  right 
may  be  less  injurious  than  a  deviation  upon  the  other 
side.  And  if  this  position  be  the  right  one,  the  ex- 
istence of  the  debate  is  explained.  But  if  the  right 
position  be  that  money  ought  to  be  stable  in  cost-value 
or  esteem -value,  there  should  have  been  a  question 
whether  it  is  better  for  prices  to  fall  less  or  to  fall  more 
than  the  fall  of  costs  would  require.  Such  a  question 
has  never  been  raised,  even  by  recent  advocates  of  this 
opinion.  The  fact  seems  to  be,  so  far  as  we  can  discover, 
that  in  the  past  centuries  the  deviations  between  rising 
and  falling  prices  have  mostly  been  merely  on  the  one 
side  of  what,  in  this  case,  is  the  proper  position,  since  a 
state  of  rising  prices  differs  only  in  degree  from  a  state 
of  falling  prices,  unless  the  fall  be  great  enough  to  show 
money  not  to  be  falling  in  cost -value  or  esteem -value; 
which  has  rarely  been.  Hence,  on  the  supposition  that 
money  ought  to  be  stable  in  a  labor-value,  the  existence 
of  the  debate  about  the  deviations  around  stability  in 
exchange -value  is  unexplained,— and  especially  inexpli- 
cable is  tlie  prevalence  of  the  opinion  in  favor  of  the 
greater  variation  from  stability  in  the  labor- values  in 
preference  to  the  lesser  variation.  Of  course,  the  preva- 
lence of  this  opinion  does  not  in  itself  prove  anything 
about  the  question  at  issue,  which,  in  one  form,  is  pre- 
cisely as  to  whether  this  opinion  is  right  or  wrong. 


would  be  interesting:  if  he  should  point  out  a  period  of  tolerably  stable 
prices  in  which  anybody  has  imputed  a  panic  or  a  crisis  to  that  stability. 


CONCLUDING    REMARKS  369 

But  its  prevalence  at  least  puts  the  burden  of  proof 
upon  those  economists  who  would  have  people  adopt  the 
other  opinion. 


CHAPTER   V 

CONCLUDING    REIVIARKS 


§  1.  The  problem  before  us  is,  then,  one  the  solution 
of  which  is  imperative.  Economies  pretends  to  be  a 
science.  B,ut  economics  cannot  be  a  science  so  long  as 
there  continue  among  its  most  conspicuous  adepts  the 
confusion  of  ideas  and  fallaciousness  of  argumentation 
that  we  have  been  tracing.  In  any  branch  of  study 
confusion  about  the  fundamental  idea  involved  is 
intolerable.  The  first  essential  in  science  is  clearness  of 
thought. 

And  in  our  science  it  is  important  that  after  dis- 
tinguishing between  the  several  kinds  of  value  we  should 
be  able  to  measure  them.  Values  are  the  quantities 
with  which  economics  deals;  and  economics  cannot  be  a 
science  until  it  can  measure  the  quantities  with  which  it 
deals.  Economists  ought,  therefore,  not  to  rest  until 
they  shall  have  reached  the  clear  and  definite  theory  of 
what  constitutes  stability  or  variation  of  each  of  the  two 
or  more  kinds  of  value  and  how  each  of  these  is  to  be 
measured,  and  until  they  shall  have  carried  out  such 
mensuration  in  ])ra('tice  with  the  greatest  possible  ac- 
curacy. It  is  remarkable  that  much  more  has  been  done 
in  this  line  of  research  in  connection  with  the  measure- 
ment of  exchange-value  than  with  the  measurpment  of 
the  other  kinds  of  value  — and  even,  rather  curiously, 


370  TOWARD   A    SOLUTION 

by  those  who  do  not  care  about  money  being  stable  in  ex- 
change-value. It  is  specially  incumbent  upon  those  who 
want  money  to  be  stable  in  the  other  kinds  of  value  to 
perfect  the  conception  of  what  constitutes  stability  in 
those  kinds  of  value,  and  to  do  something  toward  the 
practical  measurement  of  them  by  elucidating  the  theory 
of  their  mensuration. 

Independently  of  the  attainment  of  such  clearness  of 
ideas  and  of  the  methods  of  measurement,  the  question 
should  be  disposed  of  as  to  which  kind  of  value  it  is 
which  through  the  course  of  time  money  measures  and 
stores  and  in  which,  consequently,  it  ought  to  be  stable. 
Settling  this  question  is  indispensable  for  making  scien- 
tific the  branch  of  economics  which  treats  of  money. 
The  serving  as  the  measure  of  value  through  the  course 
of  time,  or  as  the  standard  of  value,  and  the  serving  as 
a  store  of  value,  are  two  among  several  fundamental 
functions  of  money.  These  functions  enter  into  the 
definition  of  money,  and  form  part  of  its  very  essence. 
To  be  good  money,  money  must  behave  properly  in  these 
two  functions.  And  for  the  science  of  money  to  teach 
what  is  good  money,  it  must  teach  which  kind  of  value 
it  is  that  money  measures  and  stores.  Then  more  atten- 
tion may  be  devoted  to  the  kind  of  value  determined 
upon,  than  to  the  others. 

§2.  By  settling  a  question,  in  any  science,  is,  of 
course,  meant  the  making  the  solution  so  simple  and 
plain  and  demonstrative  that  there  can  be,  and  is,  no 
disagreement  further  upon  the  subject  among  sensible 
men:  wherefore  anyone  who  continues  to  dispute  about 
the  matter  or  to  say  that  he  cannot  "see"  the  truth  of 
the  solution,  is  by  general  consent  shoved  aside  as  in- 
compete?it.     There  appears  in  the  subject  before  us  uo 


CONCLUDING    REMARKS  371 

inherent  reason  why  sncli  a  settlement  of  the  question, 
why  such  a  universal  agreement  upon  one  solution,  why 
such  a  natural  ostracism  of  all  dissenters,  should  not  be 
attained.  To  be  sure,  economics  has  the  misfortune  of 
being  a  moral  science,  in  which  self-interest  and  desire 
have  influence  upon  the  intellect  to  befog  and  to  distort 
the  perception  of  truth.  But  it  would  seem  that,  while 
these  perverting  influences  shall  always  operate  in  the 
manifold  outlying  details  into  which  economic  inquiry 
may  ramify,  yet  at  the  very  core  of  the  science  the 
amount  of  attention  which  may  be  concentrated  ought 
to  be  able  to  produce  such  agreement  as  may  be  found, 
in  the  physical  sciences,  in  the  outlying  details.  Here, 
at  least,  is  a  point  at  which  the  impartial  theorizing  of 
disinterested  science  might  bear  down  and  override  the 
fallacies  and  sophisms  of  self-interest.  Otherwise  the 
case  of  economics  is  hopeless. 

§3.  It  would  be  well  also  to  settle  the  question  now. 
For  if  geologists  may  be  believed,  there  is  a  prospect  of 
gold  ceasing  to  appreciate  in  exchange-value,  and  even 
of  its  declining  in  exchange -value,  for  a  time  at  least. 
Gold  will  then  no  longer  be  a  stable  measure  of  cost- 
value  or  esteem -value,  if  indeed  it  has  been  such.  Shall 
those,  then,  who  have  been  defending  the  gold  standard 
on  that  score,  now  turn  around  and  defend  it  for  being 
a  good  measure  of  exchange- value  ?  We  have  seen,  in 
an  earlier  transition  of  the  same  sort,  McCulloch  make 
this  very  change  of  position,  just  as,  contrariwise,  in  a 
later  transition  in  the  opposite  direction,  Jevons  and 
others  made  the  opposite  change  of  position.  Such 
turning  about  in  a  theoretical  position  merely  for  the 
sake  of  a  practical  preoccupation,  such  abandonment  of 
principle  in   deference  merely  to  a  thing,  or  to  those 


372  TOWAED    A    SOLUTION 

whose  interests  are  bound  up  in  that  thing,  is  a  phe- 
nomenon which  eonhl  be  found  iu  no  other  science.  It 
is  a  phenomenon  little  creditable  to  political  economy, 
and  one  against  the  repetition  of  which  economists 
ought  to  be  on  their  guard.  Political  discussions  on 
this  subject  have  now  come  to  a  stand-still,  and  there  is 
a  breathing  spell  during  which  pure  economics  may  have 
time  to  reach  a  decision. 

§4.  That  the  scientifically -minded  and  theoretical 
economists  may  overbear  the  interest -warped  practical 
men,  they  must  be  united  among  themselves.  If  eco- 
nomics is  really  to  be  a  science,  it  must  command 
unanimity  of  opinion  among  its  adherents,  as  well  as  do 
physics  and  chemistry  and  other  established  sciences. 
A  science  divided  against  itself  is  no  science.  How  can 
such  unanimity  be  procured?  Only  by  concentration 
of  attention,  and  willingness  to  borrow  from  the  best 
sources.  Economics  is  too  wide  a  field  for  one  man  to 
do  original  work  in  the  whole  of  it.  Like  other  sciences, 
in  its  beginnings  it  could  be  wholly  covered  by  indi- 
vidual investigators.  But,  with  the  rest,  it  has  ad- 
vanced to  a  stage  requiring  subdivision  of  labor.  It 
now  needs  to  be  worked  at  piecemeal,  by  specialists  de- 
voting themselves  to  particular  departments  in  it. 
When  solid  truths  are  discovered  by  these,  in  an}'  one 
branch,  it  is  to  be  expected  they  will  be  accepted  by 
specialists  in  other  branches,  and  finally  by  those  who 
are  not  specialists  at  all. 

With  these  remarks  the  question  may  be  submitted 
to  the  judgment  of  others.  It  should,  however,  always 
be  remembered  that  it  is  not  a  question  to  be  decided  by 
business  men  advocating  their  own  interests,  nor  by 
politicians  flattering  the  interests  of  those  from  whom 


CONCLUDING    REMARKS  373 

they  expect  preferment.  It  is  not  a  matter  of  debate 
particularly  between  bimetallists  and  monometallists, 
between  inflationists  and  contractionists.  It  is  not  a 
bone  of  contention  principally  between  mine  owners  and 
bankers,  between  employers  and  employees,  between 
debtors  and  creditors.  It  is  comprehensive  of  the  in- 
terests of  all  these,  and  of  their  just  claims.  Nor  is  it 
a  subject  to  be  lightly  passed  upon  by  litterateurs  indit- 
ing readable  Avorks  on  economics  and  text-books  for 
schools  and  colleges.  Such  writers  should  take  their 
doctrines  from  the  really  serious  inquirers.  It  is,  in 
short,  a  question  to  be  settled  by  scientists,  for  the  use 
of  statesmen,  who  have  at  heart  the  welfare  of  their 
countrymen. 


INDEX 


Adams,  T.  S.  212-13,  214,  234, 
329 

Addington  239 

Alison,  A.  175,  219 

Andrews,  E.  B.  225,  226,  244 

Arendt,  O.  220,  255 

Ashley  145n 

Atkinson,  E.  204n,  238,  272 

Austrian  school :  their  theory  of 
value  19;  apply  it  to  the  stand- 
ard 86;  concern  themselves 
about  esteem-value  165,  288 

Authority,  appeal  to,  in  our 
subject  inept  263,  301-2 

Babbage  78-9,  174,  237 

Babeion,  E.  255 

Bagehot  244,  255 

Bailey  150-4,  157,  192,  219,  242, 
265 

Balancing  between  costs  or 
abundance  of  goods  and  the 
same  of  money  71,  97u,  138- 
40,  170,  173,  180-1,  241-2, 
243,  250-1 

Balfour,  A.  J.  15n 

Bamberger,  L.  240 

Banking  school  175 

Barbour,  D.  15n 

Bastable,  C.  F.  239n 

Bastiat  99n,  104-5,  259 

Beecaria  42-3 

Beeton,  H.  E.  225,  255,  258 

Berkeley  259,  325 

Bimetallism,  limping,  use  to  be 
be  made  of  186,  224-5 

Bimetallists:  their  position  on 
our  problem  15,  17,  25,  189- 
96,  225-6,  251 ,  263,  264,  270-1, 
298-9;  an  exception  16;  some 
confused  ones  146-8;  a  vari- 
ant 211-12 


Birch,  J.  W.  14n 

Birmingham  school  174-5 

Blake,  H.  W.  237 

Blanqui  177 

Bod  in  3  In 

B3hm-Buwerk,     E.    von    207-8, 

219,  234 
Boisquillebert  258 
Bolles,  A.  S.  199 
Bonnet,  V.  238n,  254n 
Borden,  J.  232 
Bordet,  H.  38n,  238n,  254n 
Bosanquet,  C.  238u 
Bourne,  S.  237 
Bowen,  F.  38n,  112n,  124-6,  215, 

216,  219 
Bramwell  237 
Brough,  W.  220,  239 
Buchanan,  T.  B.  146-7 
Burlamaqui  184 

Cairnes  84n,   215,   218,  219,  242 

Canard  64 

Cantillon  39,  46 

Capitalists,  two  classes  of  317n, 

359 
Carli  41 

Carlile,  W.  W.  145-6 
Carlisle,  J.  G.  238,  268n 
Carreras  9S-9,  100,  243 
Carroll.  E.,  Jr.  239 
Castlereagh  168 
Cazenove,  J.  79n 
Cernusehi,  H.  255 
Ciiapin,  A.  L.  97n 
Chaplin,  H.  J5n 
Chapman,  R.  B.  225 
Cherbuliez  81  n,  243 
Chevalier,  M.  38n,  99-100,  117, 

178n,  219,  239,243,  272,  273n, 

302 
Childers  239 


(375) 


376 


INDEX 


Cibrario,  L.  38n 

Clark,  J.  B. :  his  theory  of 
stable  value  20-12,  205-7,  22G, 
234,  282,  333;  of  adjustment 
by  rate  of  interest  22n.  133n, 
142n,  345 

Classes  of  society,  argument 
misapplied  to  26ti;  interests 
of  35S-9 

Commodity  standard,  the  stand- 
ard of  exchange-value  12,  24, 
222;  relation  to  use-value  17, 
24,  cf.  207,  209;  excludes 
money  I5n;  may  include  some 
services  (see  Services)  ;  in- 
volves no  theory  of  value  19, 
29G-7;  history  of  31,  4;/-4,  46, 
167  204,  reviewed  223-6;  con- 
fined to  special  commodities 
78n,  12  J,  167,  182n,  wroug- 
ness  of  this  276 

Commodity- and-labor  standard 
223 ;  history  of,  as  a  mediate 
standard  205-14;  reasons  for 
rejecting  327-34 

Commodity -and- wages  standard 
222,  2267,  (see  Wages) 

Commodity-value,  same  as  ex- 
change-value 12,  84 

Condillac36 

Conrad,  J.  224 

Contracts,  see  Loans 

Convenience  of  measurement: 
one  standard  preferred  to  an- 
other on  this  account  65,  73-4, 
75,  81-2,  86-7,  121-2,  276-7, 
280,  300-1 

Corn  standard,  maintained  32, 
33  and  n,  30-7,  38n,  45n,  49. 
49-50n,  106,  117,  125,  147, 
150;  rejected  99,  118,  169; 
mixed  with  others  115,  169; 
on  reasons  advanced  for  33-4, 
110-11;  not  stable  in  any 
kind  of  value  37-8 

Cost,  better  term  than  price  for 
labor  of  obtaining  48;  used 
in  distinction  fi'om  real  value, 
not  consistently  91-2 ;  pi'oper 
use  of,  in  economies  291-2 


Cost  standard,  history  of  53-5, 
58,  8/-8,  90-3,  95  6,  97,  106, 
110,  118,  122-3,  144,  145,  150, 
reviewed  232-4;  standard  of 
cost-value  222;  often  united 
indifferently  with  the  wages 
standard  85-6,  102,  234-5; 
nature  of  280-1,  differentiated 
from  the  wages  standard 
281-3 

Cost- value,  defined  C;  how 
measured  7  8  (see  Measure- 
ment) ;  relation  of,  to  labor 
9;  often  amalgamated  with 
esteem-value  11-12;  not 
measurable  by  the  commodity 
standard  5;.  ;  all  commodities 
can  together  rise  or  fall  in  58, 
71  n,  100,  lOOn,  104,  116,  135, 
this  desirnble  96,  103,  300; 
influence  of  quantity  upon,  in 
money  253n 

Coste,  A.  187-8,  250 

Cotterill,  C.  F.  15Jn 

Courcelle-Seneuil  182 

Cournot,  A.  A.  238n 

Courtnev,  L.  H.  14n,  16,  226n 

Craufuril  169,  219,  238u 

Cross,  W.  224 

Crump,  A.  228,  237 

Cummings,  J.  22 

Currency  principles  170 

Currie,  B.  237 

Darwin,    L.    26n,    209-12,   216, 

218,  220,  234,  306n 
Davenport,    H.    J.    26n,    208  9, 

216,  220,  227,  242 
Demand:  two  meanings  of  the 

terra  35 
Denis,  H.  226 
Denslow  194,  22f) 
Drapala,  T.  238 
Drobisch,  ]\I.  W.  219 
Dumas,  J.  B.  246 
Duncan,  J.  38n 
Dupre  de  Saint-Maur  41 
Dutot  41 

Earnings:     their      variation     a 


INDEX 


Zll 


measure  of  esteem-value  10, 
50-1,  cf.  332-3 

Earnings  sttmdard,  better  than 
wages  standard  50,  222;  as 
yet  imperfectly  worked  out 
279 

Eekhel  41 

Edgeworth,  F.  Y.  25-6 

Elder,  W.  188-9,  244 

Ellis,  A.  G.  349n 

Ellisscu,  A.  238 

Ely,  K.  T.  155 

Esteem-value,  defined  6;  how 
measured  7,  8,  ]0  (see  Meas- 
urement) ;  relation  of,  to  la- 
bor 9,  296 ;  often  amalgamated 
with  cost-value  11-12;  at- 
tempts at  clearing  up  the 
conception  of  20,  21-2,  86, 
332-3;  all  commodities  can 
together  ri^e  or  fall  in  58, 
71  n,  83-4,  135;  may  be  sub- 
stituted for  cost-value  but  not 
for  exchange-value  288-9 

Estrada  109   10 

Evelyn  41,  167,  168,  227 

Exchange -value,  defined  6;  how 
measured  8-10  (see  Measure- 
ment) ;  confounded  with  use- 
value  18,  23-4,  cf.  38n,  with 
esteem-value  29n,  fi2-3,  67, 
67  9n,  72,  86  7n,  with  cost- 
value  58-9,  97,  with  either 
216-17;  all  commodities  can- 
not together  rise  or  fall  in  58, 
71n,  75,  84,  104n,  116,  117, 
119,  120,  136,  137-8,  161,200, 
244,  276;  political  economy 
said  to  be  confined  to  215-16 

Extrinsic  value,  in  money  2-3; 
another  interpretation  161  ; 
doctrine  of  money  being  con- 
stant in  3.  256 

Farquhar,    H.    23-4,    205,    209, 

227 
Farrer,  T.  H.    14n,    133-6,   216, 

220,  237,  242,  247n,  248,  271 
Faueonnier,  E.  215 
Fauveau,  G.  215 


Fawcett,    II.     127-9,    215,    216, 

218,  219,  239,  255 
Fetter,  F.  26n,  295n 
Flamingo,  G.  M.  238 
Fisher,  I.  346a 
Fisher,  W.  25n,  255 
Fleetwood  40,  258 
Fonda,  A.  L.  224,  244 
Ford,  T.  J.  143 
Forssell,  H.  237,  274,  353 
Foville,  A.  de  219 
Fowler,  W.  237,  245 
Foxwell,  H.    S.   226,   251,  268n, 

269n,  270 
Franklin  39,  45 
Fremantle,  C.  W.  14n 
Frost,  O.  J.  224 

Galiani  42,  218,  259 

Ganilh  219 

Garnett,  L.  A.  39n,  229 

Garnier,    G.   38n,   149-50,    219, 

258 
Garnier,    J.    116-17,    119,    215, 

217,  219,  239,  259,  271 
Genovesi  218 
George,  H.  85n,  216 
Giffen,  R.  162-5,  219,  224,  242, 

251,  255,  268n,  269n,  271 
Gilbart,  J.  W.  255n 
Gold,   preferred    as  a   standard 

because  not  a  regular  industry 

81n,  98,  99-lOOn,  117-18,  158, 

2-13 
Gold  and  Silver  Commission  13- 

15 
Goschen,    G.  J.   201,    251,    255, 

268n 
Gossen,  H.  H.  183n 
Gouge,  W.  M.  11  In,  112,  219 
Graham,  J.  G.  3Sn,  219 
Gray,  J.  79,  231,  271 
Gray,  J.  H.  25n,  264n 
Greven,  H.  B.  220 
Grier,  J.  A.  146 
Grittner,  H.  220 
Grotius  32 

Hadley,  A.  T.  131-3,   220,   249, 
259,  325,  345 


378 


INDEX 


Hamilton,  A.  218 

Hamilton,  R.  S3J 

Hausard,  L.  219,  249,  271 

Harger,  C.  G.  233 

Harris  45 

Harvey,  W.  H.  225 

Heeht,  C.  245,  252 

Helffericb,  K.  27,  28,  229,  238, 

242,  268n 
Herschell  14n 

H.^rtzka,  T.  201-2,  244,  252 
Hill,  E.  179 
Hoare,  H.  219 

Holt,  B.  W.  227-8n,  345,  347n 
Horner,  F.  38ii 
Horr,  R.  G.  143,  230,  272 
Horton,  S.  D.  189-91,  220,  223, 

251 
Houldsworth,  W.  H.  15ii,  251 
Hume  72n,  124,  126 
Huskisson  169-70,  174 

Income  standard  85,  222 

Interest,  rate  of,  not  value  5- 
G;  yet  nsed  in  measuring  va- 
riation in  value  of  money  229, 
247 ;  correction  of  a  varying 
standard  by  adjustment  in 
rate  of  22n,  133,  142,  345, 
reply  346-7;  abstinence  the- 
ory of  318-19n 

Intrinsic  value,  in  money  2-3; 
various  interpretations  35n, 
l»6n,  96-7,  150,  194  and  n, 
203;  doctrine  of  money  being 
constant  in  3-4,  5n,  28n,  92, 
256,  cf.  189 

Intrinsic  value  in  exchange: 
term  used  by  Malthus  66-8, 
70,  ef.  116n 

Jackson,  C.  C.  230,  273n 

Jakob,  von  64 

James,  H.  175-6. 

Jefferson  33n 

Jevons  11,  38n,  154-60, 163,  182, 
183,  186,  215,  216,  218,  219, 
223,  224,  239n,  243,  244,  302, 
371 

Jourdan,  A.  27n,  200-1,  218 


Kant  259 
Kellogg,  E.  5n 
Kinder,  F.  S.  352n 
Kleser,  H.  219 
Knies,  K.  200,  219 
Knott,  R.  W.  143 
Krai,  F.  237 
Kudler  64 

Labor:  its  relation  to  cost-value 
and  esteem-value  7-8;  sup- 
posed to  be  excbangealsle  for 
other  things  9,  70n,  75,  228- 
31,  incorrectness  of  this  9-10, 
328,  cf.  76,  recognized,  79; 
its  value  supposed  to  be  con- 
stant 47,  70,  75-7,  cf.  84n,  or 
rather  th-e  value  of  its  product 
70,  90,  91,  109,  cf.  79  80,  or 
(apparently)  confined  to  labor 
of  constant  productivity  99, 
104;  not  it,  only  its  product 
has  value  161,  208 

Labor  standard,  of  labor-value 
(q.  V. ) ;  history  of  45,  46, 
47-8, 76, 102, 104, 117, 125-6n, 
143,  228-31;  rejected  99, 
118;  need  of  same  qualitv  of 
labor  18,  24,  193-4,  260, 
322-7 

Labor-value,  mixture  of  cost- 
value  and  esteem-value,  12, 
223 ;  various  uses  of  the  term 
84,  131n 

Land  standard,  history  of  38-9  ; 
added  to  others  39n,  143,  169; 
condemned  40 

Lanjuinais,  V.  238n 

Latimer  3 In 

Laughlin,  J.  L.  136-42,  181n, 
216,  219,  223,  237,  242,  247n, 
258,  345 

Laveleye,  E'.  de  220,  246,  255 

Laves,  T.  224 

Law,  J.  39,  218 

Leaver,  J.  C.  230 

Leber  100 

Lehr,  J.  219 

Leighton,  G.  E.  230,  268n 

L6on,  M.  225 


INDEX 


370 


Leroy-Beaulieu,  P.  4n,  118-19, 

2M,  2-J4,  227,  237,  272 
LevHssenr,  E  38n,  117-18,181-2, 

219,  2-43,  251_,  272 
Lexis,  W.  236 
Liiiderman,  H.  E.  219 
Lindsay,  S.  McC.  220 
Lipke,  W.  45n,  233u 

Loans,  question  of:  referred  to 
42-4,  85,  118,  127,  130,  132, 
136,  137,  141,142, 144.  147-8, 
149,  153-4,  165-6,  195,  196, 
198,  203,  209 ;  reviewed  223-4, 
2.')6-67;  discussed  309,  31 1-36 

Locke,  5n,  8,  33,  34,  35,  35-6u, 
106n,  111,  169n,  183n,  218 

Lohren  249 

Loria,  A.  100-1,  233,  307n 

Lowe,  J.  171;  his  scheme,  fa- 
vored 118,  130,  15(,  165,  174, 
178,  200,  reviewed  223-4,  re- 
jected 132,  153,  165, 186 ;  crit- 
icised 309q 

Lubbock,  J.  14n 

McCIeary,  J.   T.   231,   238,  239, 

273n,  304n 
McCulloch  28n,  48n,  87,  88-95, 

111,  174,  215,  237,  304,  371 
Maclaren,  J.  178-9,  223 
Macleod,  H.  D.  160-2,  182,  215, 

217,  219,  237,  259 
McVey,  F.  L.  203-4,  358n 
Madrazo  119-20,  215 
Malestroit  31n 
Mallet,  L.  15n 
Malthus  29n,  48n,  64-74,  77-Sn, 

78,  80,  82,  86,  90n, 106n, 116n, 

121,  123,    152,  215,   217,   2J2, 

237,  271,  280n,  295,  304 
Mann,   C.   A.   126-7,   218,    219, 

223 
Mannequin,  T.  225 
Marshall,   A.   129-31,   202,   216, 

220,  223,  255,  272,  277,  304 
Marshall,  Mrs.  130n 

Marx,  K.  lOln,  233n 
Mavo-Smith,  R.  26n,  248n,  271, 

272 
Measurement:    different  of  the 


different  kinds  of  value  6-8, 
confusion  concerning  101 ;  of 
cost-value  7-8,  53-4,  88,  90, 
99,  106,  123,  requiring  ex- 
amination of  causes  89,  93-4, 
2j,6-9,  cf.  306-7n;  of  esteem- 
value  7,  8,  10,  49-50,  68-70, 
80,  requiring  examination  of 
causes  68-9n,  and  of  quanti- 
ties 246-9,  needs  development 
214,  248m,  283;  of  exchange- 
value  8,  57,  71,  89,  KlOn,  107, 
109-10,  116,  117,  118,  121, 
126,  128,  131,  149,  192,  non- 
observance  of  statement  218- 
20,  excluding  examination  of 
causes  136,  155,  182, 190, 192, 
193,  196,  199n,  243-4,  and 
question  of  probability  156n, 
(see  Commodity  standard; 
cf .  Couvenieneej ;  needed  in 
science  369 

Medley,  G.  W.  285n 

Menger,  C  86-7,  183 

Merriam,  L.  S.  18-19,  20,  296n 

Mill,  J.  87-8,  216 

Mill,  J.  S.  38n,  120-4,  125n, 
126,  129n,  138,  179,  215,  217, 
219,  258,  295,  302 

Miller,  H.  J.  225 

Miller,  M.  A.  231,  259 

Mixter,  C.  W.  265n 

Molinari,  A.  de  224 

Money:  functions  of  1,  304,  (one 
of  them  denied  105n),  their 
separability  157,  199;  theory 
of  a  fixed  quantity  of  5,  183n; 
whether  it  has  use-value  11  ; 
State  duty  to  regulate  its 
value  2,  27-8,  189,  190,  193, 
225n,  denied  169n,  204n  ;  reg- 
ulation of,  with  a  view  to 
stability  in  intrinsic  value  3, 
28n,  in  cost-value  27,  101, 
233,  in  esteem -value  79,  83, 
231  2,  in  exchange-value  25, 
27  and  n,  130.  176,  186,  200, 
224-5,  253,  255-6;  conceived 
as  bill  of  exchange  upon  so- 
ciety  lOou,    208u,    257-60;    a 


380 


INDEX 


go-between  or  medhim  137, 
258,  the  "medial  eomruodity" 
152n;  four  causes  of  changes 
in  its  ( exchange- ) value  139, 
180,  ef.  lo3,  reduced  to  two 
180-1,  ef.  138;  question  of  its 
eostUSo  46,  influence  of  quan- 
tity upon  253n;  question  of 
its  quantity  246-56,  argument 
about  ils  sufficiency  247-8n, 
need  of  its  expansion,  dining 
progress  173,  195;  tlie  best, 
curious  opinion  about  LOi  and 
n;  not  a  distributor  of  wealth 
t )  classes  of  society  302 

Moiigin,  M.  233-4n 

Mongredien,  A.  219 

Monometallists:  their  position 
on  our  problem  14,  17,  25,  85- 
6,  102,  230-1,  232  3,  271-2, 
263,  271-3,  297-9;  exceptions 
193-204,  L51 ;  some  confused 
ones  133-46 

Montagu,  S.  15n 

Montanari  3--',  218 

Moore,  R.  229 

Moran,  C.  239n 

Mulhall,  M.  G.  240 

Nash,  R.  L.  231 

Nasse,  E.  237,  241-2,  269n 

Newcomb,  S.  199-200,  219,  223, 

224,  250n 
Newmarch,  W,  38n,   17Sn,    182, 

255 
Nicholson,  J.  S.  193-4,  216,  218, 

220,  224,  244,  322 
Nicholson,  N.  A.  215,  268n 
Noniiiinl  value:  various  uses  of 

the  term  4(i,  56 
Norman,  J.  H.  4n 

Osborne,  G.  P.  220,  224 
Owen,  R.  7Sn 

Pagnini  36n 
Pareto,  V.  227,  238 
Parsons,  F.  224 
Patterson,  C.  S.  204 
Patterson,  J.  234 


Patterson.  R.  H.  225,  255 

Peel,  R,  ]71n 

Perry,  A.  L.  196-8,  21G,  218,  244 

Petty  32-3,  46 

Pierson,  N.  G.  237,  271 

Pollard,  T.  I.  83-5,  231,  265, 
271 

Powers,  H.  H.  25n,  264n 

Powers,  L.  G.  231 

Price:  its  meaning  292,  con- 
fused with  cost  103,  116, 
210-1,  error  of  this  300,  vari- 
ous uses  48-9,  90,  98,  113-14. 
Prices  of  commodities:  gen- 
eral fall  of,  desired  100,  105, 
116,  118n,  119,  134,  144,  145, 
165,  204,  241,  247,  271-2; 
stability  of.  desired  138.  186. 
190,  193,  197,  270-1;  failing, 
preferred  to  rising  200;  ris- 
ing, preferred  to  falling  168n, 
191n,  192,  202,  211,  367; 
movement  of,  in  relation  to 
progress,  see  Progress;  in  re- 
lation to  laborers  268-9 

Price,  B.  96,  219 

Price,  L.  L.  195-6,  251,  271 

Prince-Smith,  J.  181,  189n,  219 

Prinsep,  C.   R.   5n 

Problem,  the:  nature  of  1-2, 
11-13,  (see  Stability);  impor- 
tance of  26-9;  when  indiffer- 
ent and  when  not  260,  283-4; 
history  of  13-26,  31ff.,  284-5: 
unprecise  attitude  regarding 
285-6;  need  of  settling  370, 
and  now  371,  by  whom  372-3 

Progress:  in  periods  of,  the  dif- 
ferent kinds  of  value  diverge 
260,  283-4;  supposed  to  tend 
to  lower  prices  239-40;  sup- 
posed to  tend  to  raise  prices 
238  9n:  identified  with  fall  of 
values  and  of  prices  116,  119, 
240-1,  271 

Proud hon  234n 

Pufendorf  39 

Quantity  theory  252-5 
Quenstedt,  M,  232,  233n,  243 


INDEX 


381 


Raphael,  H.  L.  237 

Ran  11,  64n,  115-16 

Raviuond,  D.  176-7,  182,  215, 
219 

Real:  term  applied  to  value  13, 
variously  46-9,  56,  59,  83,  84, 
90,  91,  106,  108,  109,  130, 
13 In,  192,  203,  wronj?  use 
of,  in  argument  61-2,  262-3; 
applied  to  exchange-value, 
meaning  of  59;  applied  to 
price  48  9,  60;  applied  to 
wages  J31  ;  significance  of 
61,  291-5 

Rent,  comparison,  of,  with  in- 
terest and  wages,  and  reason 
for  its  exclusion  from  our 
subject  338  9n 

Ricardo:  53-9,  compared  with 
Adam  Smith  59-62;  his  fol- 
lowers 62-3,  78n,  87-104,  his 
school  129n,  280;  referred  to 
10,  50n.  105,  107,  108,  110, 
111,  114,  118,  150-1,  154,  160, 
166,  167,  170,  173,  174,  179, 
182,  191-2,  215,  216,  217,  219, 
2:7,  251,  254,  255,  302 

Roberts,  G.  E.  144-5,  271,  274, 
324,  324-5n,  345.  347n,  353 

Robertson,  J.  B.  224 

Roscher 1 1 ,  33n, 38n,  99, 1 13  15, 
219,  302 

Ross,  p:.  A.  17  18,  20,  23,  24, 
25n,  194,  205,  209,  220,  322 

Rossi  lOln,  177-8,  179 

Russell  233 

Saint- Andre  33n 

Sanerljeck,  A.  251 

Sav,  J.  B.  38n,  105-9.  110,  111, 
il3,  215,  216,  219,  239,  302 

Schaffle,  A.  225 

Scliarling,  W.  242,  251,  255. 

Si'hmidt,  II.  245 

Sehconhnf,  J.  2:;8,  240 

Scott,  W.  A    25u 

Sernpp,  G.  P.  27,  28,  1.53,  157, 
172-4,  17-,  179,  181  n,  186, 
202,  215,  216,  1:17,  219,  223, 
224,  244,  250,  252,  264 


Senior,  N.  W.  74-7,  114,  216, 
271,  293n 

Services,  in  the  passive  sense, 
to  be  included,  if  practicable, 
in  the  commodity  standard 
277,  322,  328,  cf.  76,  160-1 

Seyd,  E.  189 

Sliadvvell,  J.  L.  79-82,  85,  232, 
243,  271,  280 

Shaw-Lefevre,  G.  238,  251 

Sherwood,  S.  25n,  195,  255 

Shiblev,  G.  H.  226,  2(i4ii,  304n 

Sidgwick,  H.  191-3,  216,  218 

Silver,  preferred  as  a  standard 
because  a  regular  industry 
245-6 

Smart  258 

Smith,  Adam:  46-53;  compared 
with  Ricardo  59-62;  his  fol- 
lowers 6_-3,  64-87;  his  school 
129n;  referred  to  8-9,  36,  37, 
38n,  90,  102,  110,  111,  114, 
117,  134,  135,  149,  150,  166, 
177,  IHOn,  215,  217,  232,  238n, 
258,  271,  302 

Smith,  J.  A.  25,  224,  264n, 
283  n 

Smith,  J.  P.  39n,  169,  219 

Smith,  R.  H.  5n 

Smith,  T.  45n 

Smitli,  W.  H.  225,  264n 

Soden  33n 

Soetbeor,  A.  238,  241 

Solera  41,  219 

Speculation,  exposed  to  loss  ag 
well  as  to  gain  314-16 

Stability  of  value  in  money: 
1-2,  6,  11,  23;  the  problem 
threefold  11,  treated  as  two- 
fold 12-13,  14,  16,  17,  22,  23, 
24,  2"),  26a.  235ff. ;  argument 
for,  in  a  labor-value  85,  274, 
338,  312-5,  3.">2-4,  356,  360-1  ; 
aruiuUieiit  for.  in  exchange- 
value  173-4,  275.  340-2.  345- 
51, 355-6. 357-9.  361-2,  363  4; 
on  the  decisive  argumoi't  .365- 
6;  the  burden  of  proof  369 

Stnndai-ds  of  value:  .'^t.-ibility  of 
14;    on  mixing   incompatible 


382 


I2WEX 


elements  110-13,  114,  117, 
120,  125;  classification  of 
222-3;  comparison  of  261-2, 
269-70,  286-8;  wrong  argu- 
ments concerning  288-;^02 ; 
nature  of  the  arguments 
302-3 

Statistics:  reference  to,  in  ar- 
gument for  the  standard 
304-8 

Steuart,  J.  44n,  233n 

Stirling,  P.  J.  179-81,  217,  219, 
244,  250 

Stokes,  A.  P.  226n,  240n 

Storing,  a  function  of  money  1, 
308-9;  nature  of  310-11 

Suess,  E.  255 

Sydow-Dobberphul,  H.  von  220 

Symmetallism  130,  226n 

Tariff:    its   relation   to    falling 

prices  3-18 
Taussig,  F.  W.  25n,  220,  244n, 

2G3n,  266n,  269n,  272 
Tavlor,  J.  38n 
Thornton,  H.  258 
Thorwart,  F.  238 
Tooke,  T.  4n,  107n,   164,   168n, 

178n,  237 
Torrens,   R.   150,    170-1,    181n, 

192,  219,  244,  250,  297 
Trtnholm,  W.  L.  202-3,  220 
Trusts,  so-called;  their  relation 

to  falling  prices  348 
Tjirgot  8,  84n 

Use-value,  defined  6;  how  meas- 
ured 6-7:  to  be  rejected  9,  11, 
not  so  177;  used  for  exchange- 
value  17,  18,  error  from  mis- 
interpreting this  23-4;  used 
for  esteem-value  ll'S 

Value:  tei-m  ambiguous  2;  old 
division  of  2-3;  identified 
■with  interests;  the  subject  of 
economics  27  and  n,  196,  369; 
four  kinds  of,  in  economics  6, 
11,  GO  1;  dichotomy  of  8-9, 
error    of    this  10-11  ;  trichot- 


omy 11,  66,  113,  156,  cf.  88; 
double  dichotomy  46,  55-6, 
67,  error  of  this  60 ;  various 
divisions  35-6n,  36  and  n,  46, 
55-6,  65-7,  84,  86-7,  88-9,  91, 
96n,  109,  113,  115,  156,  177; 
taken  in  single  sense  98,  100, 
lOln,  119,  120,  197,  not  con- 
sistently observed  217-18,  ef. 
218-20,  error  of  attempting  to 
do  so  288-91 ;  theories  of, 
nothing  to  do  with  our  sub- 
ject 17-18,  19,  54,  151,  170, 
179-80,  295-7,  cf.  64,  123 

Vaseo  43-4,  216,  219 

Vaughan  32,  33,  37,  49 

Verri  43,  218 

Virdunginus  31n 

Wages,  included  with  commod- 
ities in  the  standard  of  value 
41,  51,  89,  114,  118n, 135,142, 
143,  147,  168,  19J,  208,  227, 
302,  error  of  this  51-2,  277-9, 
expressly  excluded  171,  174, 
196,  cf.  192;  stability  of,  de- 
sired 116-17,  134,  165,  271-2, 
rise  desired  119,  144,  270-1, 
272,  fall  desired  164-5;  argu- 
ments concerning  267-75, 
351-9 

Wages  standard,  of  esteem- 
value  10,  222;  maintained  32, 
37,  45,  49-50,  53,  68-71,  75, 
78n,  78  9,  80-2,  83-5,  104, 
145,  228  32;  rejected  110, 
192;  nature  of  279-80:  con- 
founded with  cost  standard 
85-6,  102,  234-5 

Wagner,  A.  219,  346n 

Waicker,  K.  223 

Walker,  A.  182,  215,  216 

Walker,  F.  A.  38n,  147-8,  216, 
218,  223,  244,  302 

Walras,  A.  184 

Walras,  L.  183-8,  225,  227n, 
2  i2,  255,  297,  302 

Walsh,  R.  167,  224 

Walsh,  R.  11.  17S-9,  223,  246 

Warner,  A.  J.  25n,  255 


INDEX 


383 


Warner,  J.  De  W.  230,  238, 
273n 

Waterloo,   S.  243 

Watney.  D.  220,  251 

Waylaud,  F.  4ii,  9G-7 

Webb,  W.  li.  203 

Weissinger,  K.  220.  272 

Wells,  D.  A.  220,  228,  237,  238, 
240,  243,  268n 

Western,  C.  C.  27n,  28n,  2,31 

Wheatley,  J.  167 

Wheat  standard,  see  Corn  stand- 
ard 

White,  H.  143-4,  218.  237,  240, 
265 


Whitelaw,  T.  N.  224 
Whittick,    W.   A.   233-4n,   241, 

259 
Will,  T.  E.  224 
Williams,  A.  224 
Wilson,  J.  95  6 
Wilson,  W.  I).  98 
Winn,  H.  224 

Wisner,  E.  102-3,  239,  3G7n 
Woermann  249 
Wolowski,  L.  189 

Young,  A.  1G8,  ]71n,    227,  238n 

Zuckerkandl 165-6,  224 


UNIVERSITY  OF  CALIFORNIA  AT  LOS  ANGELES 

THE   UNIVERSITY  LI"""  ■  RV 


A  r 

LOS  ANGKLES 
UBRARY 


II^S(lllrH^R^|RlfJ()^;Al  lll!RAI?YrACILITY 


AA    000  588  376    4 


HG 
223 

vaef 


"i!  ill 

iiiliilil'ilii'!-* 


mm- 

llUliiiliiliiliilt  UliiliWii 


